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FAQs: Roll-overs
If your CGT question is not dealt with in this list of FAQ's, please address your query to cgt@sars.gov.za
1.What does roll-over mean and what assets disposed of are subject to roll-over relief?
Where assets are subject to roll-over it means that a CGT liability does not arise upon disposal but is rather deferred until a subsequent event to the extent that proceeds from the disposal are invested in a replacement asset. In the case of transfer of assets between spouses, the spouse disposing of the asset is treated as having disposed of the asset at an amount equal to its base cost and the spouse receiving it is treated as having acquired it at a cost of the same amount.
Assets disposed of under the following circumstances are subject to roll-over relief:
1. Involuntary disposal of certain assets under certain circumstances (Para. 65)
2. Reinvestment in replacement assets, under certain conditions (Para. 66)
3. Transfer of assets between spouses (Para. 67)
4. Roll-overs are also provided for in the corporate restructuring rules contained in sections 41 - 47 of the Income Tax Act. These include company formation transactions, share-for-share transactions, amalgamation transactions, intra-group transactions, unbundling transactions and liquidation transactions.
2.a. How is CGT determined on divorce?
CGT is only triggered when an asset is disposed of. The transfer of assets on divorce, and for that matter donations between spouses, is regarded as a disposal for proceeds equal to the base cost of the assets concerned. So if you receive a holiday house as part of the divorce settlement from your spouse, you are considered to have acquired the asset at the original base cost – the cost at which your spouse bought it.
When you sell it, you will pay capital gains tax on the difference between the base cost and the price for which you sell the house.
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