Being Tax Efficient : Capital Gains Tax in SA

Capital Gains Tax (CGT) is a reality for every investor or asset holder in South Africa. But being informed and strategic can make a significant difference. At Proper Group, we believe in smart, legal ways to reduce your tax liability—not through avoidance, but through informed planning based on the law.

In this post, we share 8 effective strategies to help you manage CGT efficiently, hold on to more of your hard-earned gains, and become more tax-savvy in the process.

Why Capital Gains Tax Planning Matters

When you sell an asset like property, shares, or a business, you may be liable for CGT. But through proper tax planning, it’s possible to reduce what you owe. Whether you're a seasoned investor or planning your first asset sale, these tips will help you approach CGT with confidence and clarity.

8 Ways to Reduce Your Capital Gains Tax in South Africa

1. Leverage the R40,000 Annual Exclusion

Every South African individual is entitled to a R40,000 annual CGT exclusion. That means the first R40,000 of your capital gains in a tax year is tax-free.

Tip: If you’re planning multiple asset disposals, spread them over different tax years to maximise this exclusion.

2. Take Advantage of the Primary Residence Exemption

Selling your primary residence? You may qualify for a R2 million CGT exemption on the capital gain.

Important: The exemption only applies if the property is registered in your name and has been your primary residence. If you’ve rented out a section or used it for business, only a portion of the exemption may apply.

3. Increase the Base Cost with Home Improvements

Enhance your property's base cost by including capital improvements—such as adding a new room, upgrading your kitchen, or installing solar panels. This lowers the taxable capital gain when you sell.

Regular maintenance and repairs don’t qualify. Keep your receipts and documentation safe!

4. Use Capital Losses to Offset Gains

Not every investment yields a profit—but there’s still a silver lining. Capital losses can offset capital gains, reducing your CGT bill.

Bonus: If your losses exceed your gains, the excess can be rolled forward to offset future gains.

5. Invest in Tax-Free Savings Accounts (TFSAs)

TFSAs are a powerful tool for tax efficiency. You can invest up to R36,000 annually (R500,000 lifetime), and all returns—including capital gains—are 100% tax-free.

Over time, this creates substantial savings and wealth growth without the CGT burden.

6. Know the Small Business Relief for Over 55s

If you’re 55 or older and selling a small business with a market value under R10 million, you may qualify for a R1.8 million CGT exemption.

A huge boost for entrepreneurs planning retirement!

7. Understand the 40% Inclusion Rate

In South Africa, only 40% of your capital gain is included in your taxable income. That portion is taxed at your marginal tax rate.

For example:

• If you're in the 45% bracket: 40% × 45% = 18% effective CGT

• If you're in a lower bracket, your CGT liability is even less.

Tip: Holding investments for the long term allows you to benefit from compounding returns and potentially lower overall tax when you eventually sell.

8. Contribute to Retirement Funds

When you contribute to a Retirement Annuity or other registered retirement funds:

• Up to 27.5% of your income (capped at R350,000 annually) is tax-deductible.

• These investments grow completely tax-free—no income tax, dividends tax, or CGT applies.

It’s not just retirement planning—it’s smart tax planning too.

Final Thoughts: Let’s Get Strategic About Capital Gains Tax

Managing your Capital Gains Tax in South Africa is all about making the right moves at the right time. Whether it's through exclusions, exemptions, or investing in tax-efficient vehicles, planning ahead helps protect your wealth.

At Proper Group, we’re here to help you understand these rules and apply them in ways that make sense for your unique financial picture.

Have questions about your asset sales or investments? Reach out—we’ll help you tailor a strategy that works best for you.