Capital gains tax (CGT) in South Africa isn't a separate tax — it's income tax applied to a portion of your capital gains. Understanding exactly how it works can save you significant money on investments, property sales, and business disposals. The effective rate for individuals is well below what most people fear, but the mechanics matter.

What Is a Capital Gain?

A capital gain arises when you dispose of an asset for more than its base cost. The base cost is essentially what you paid for the asset, adjusted for qualifying costs. Disposal includes selling, gifting, donating, or even losing an asset (insurance payouts may trigger CGT).

Common assets that trigger CGT:

• Shares and unit trusts (ETFs included)
• Investment property (not your primary residence — see below)
• Business interests and goodwill
• Cryptocurrency (SARS treats crypto as an asset subject to CGT or income tax, depending on frequency of trading)
• Foreign currency accounts
• Collectibles (art, wine, precious metals above R15,000)

Assets Excluded from CGT

Not everything triggers CGT. Key exclusions include:

• Primary residence: The first R2,000,000 of gain on your main home is excluded. If your gain exceeds R2M, CGT applies to the excess only.
• Small business assets: Entrepreneurs over 55 who sell a small business (or business assets) get a R1.8M lifetime exclusion under section 10(1)(o) and related provisions.
• Personal-use assets: Your car (used privately), personal jewellery under R15,000, and household goods generally fall outside CGT.
• TFSA investments: Growth inside a Tax-Free Savings Account is fully exempt from CGT — one of the biggest benefits of the TFSA wrapper.
• Life insurance policies: Death benefits and policy proceeds from qualifying life policies are generally CGT-exempt.

How CGT Is Calculated: Step by Step

The calculation has four steps:

Step 1: Calculate the Capital Gain

Capital Gain = Proceeds − Base Cost

Proceeds = what you sold for (or market value if gifted/donated).
Base cost = purchase price + qualifying acquisition costs (transfer duty, legal fees, brokerage on purchase) + improvement costs (for property).

Step 2: Apply the Annual Exclusion

Every individual gets an annual CGT exclusion of R40,000. The first R40,000 of net capital gains in any tax year is excluded. If you have both gains and losses across multiple assets, you net them first, then apply the exclusion to the net figure.

Step 3: Apply the Inclusion Rate

Only 40% of the net capital gain (after the annual exclusion) is included in your taxable income. This is called the inclusion rate. So if you have a net gain of R200,000, only R80,000 gets added to your income for tax purposes.

Step 4: Tax at Your Marginal Rate

The included amount (R80,000 in the example) is added to your other income and taxed at your marginal rate. The maximum effective CGT rate for an individual is therefore:

45% (top bracket) × 40% (inclusion rate) = 18% effective maximum CGT rate

Worked Example 1: Selling Shares

Ayanda bought 1,000 shares in a JSE-listed company at R50 each (R50,000 total) three years ago. She sold them in February 2026 for R120 each (R120,000). She also paid R500 in brokerage on purchase and R600 on sale.

• Proceeds: R120,000 − R600 brokerage = R119,400
• Base cost: R50,000 + R500 = R50,500
• Capital gain: R119,400 − R50,500 = R68,900
• Less annual exclusion: R68,900 − R40,000 = R28,900
• Inclusion (40%): R28,900 × 40% = R11,560 added to taxable income
• If Ayanda is in the 36% bracket: CGT payable ≈ R11,560 × 36% = R4,162

On a R70,000 share gain, Ayanda pays just R4,162 in CGT — an effective rate of about 6% on the total gain. That's the power of the exclusion and inclusion rate working together.

Worked Example 2: Selling Investment Property

David bought a flat for R800,000 in 2015. He spent R120,000 on renovations (with invoices). He sold it in 2026 for R1,750,000. Transfer costs on purchase were R25,000.

• Proceeds: R1,750,000
• Base cost: R800,000 + R25,000 + R120,000 = R945,000
• Capital gain: R1,750,000 − R945,000 = R805,000
• Less annual exclusion: R805,000 − R40,000 = R765,000
• Inclusion (40%): R765,000 × 40% = R306,000 added to taxable income
• If David earns R600,000 in salary, total taxable income becomes R906,000 (in the 39% bracket)
• CGT portion taxed at ~39%: R306,000 × 39% ≈ R119,340

This is a substantial tax bill — but on a R805,000 gain, the effective tax rate is still only about 14.8% of the actual gain. Without the inclusion rate, it would be closer to 39%.

The Primary Residence Exclusion

If you sell your main home, the first R2,000,000 of any capital gain is excluded. This means most South Africans who sell their primary home pay no CGT at all — gains would need to exceed R2M before any tax kicks in.

To qualify for the primary residence exclusion:

• The property must be your primary residence — where you ordinarily live
• You must have used it as a primary residence for most of the period you owned it (partial use rules apply if it was rented out for a period)
• The exclusion covers fixed property only — not contents or separate outbuildings rented out

If you rent out part of your home (like a cottage), the portion of the gain attributable to the rental portion may be taxable. The calculation is apportioned by floor area or time, depending on circumstances.

CGT and Death

In South Africa, death triggers a deemed disposal — your estate is treated as if it sold all assets at market value on the date of death. This means your estate may face a CGT liability before estate duty is calculated. There is a higher annual exclusion in the year of death: R300,000 instead of R40,000. Assets transferred to a surviving spouse are exempt from CGT (rollovers at base cost), deferring the tax until the surviving spouse eventually disposes of the assets.

Record-Keeping: What You Must Keep

SARS requires you to be able to prove your base cost. For shares, keep:

• Original purchase contract notes or trade confirmations
• Dividend reinvestment records (these add to your base cost)
• Any corporate actions (rights offers, share splits) that affect your cost basis

For property, keep:

• Original sale agreement and transfer documents
• All renovation invoices (SARS requires these to qualify as improvements)
• Transfer duty receipts and attorneys' invoices

If you cannot prove your base cost, SARS may use market value on 1 October 2001 (the CGT commencement date) for pre-2001 assets, or may disallow your base cost claim entirely for post-2001 acquisitions without documentation.

Crypto and CGT: SARS's Position

SARS does not consider cryptocurrency to be currency — it's treated as an intangible asset. If you buy and hold crypto and then sell at a profit, that's a capital gain. If you trade actively and frequently, SARS may classify your gains as income (not capital), subject to full income tax rates. The distinction is similar to shares: long-term investment vs. active speculation.

SARS has been increasingly active in cryptocurrency enforcement, cross-referencing exchange data. If you have crypto gains, declare them — the cost of not doing so far exceeds any tax saved.

Key Takeaways

• CGT = (Gain − R40,000 exclusion) × 40% inclusion × your marginal rate
• Maximum effective CGT rate for individuals: 18%
• Primary residence: first R2,000,000 of gain excluded
• Keep all purchase documents, improvement invoices, and transfer costs
• TFSA investments are CGT-exempt — use them for growth assets
• Crypto gains are taxable — SARS has data from local exchanges