FAQs: Impact of CGT on Deductions from Income

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 will the effect of CGT be when calculating the deduction for medical, donations and retirement annuity fund contributions?

Section 11(n) of the Income Tax Act limits the deduction to 15% of "income" from non retirement-funding employment after deducting admissible deductions and allowances. Since taxable capital gains are added at the taxable income level of the reduction formula, capital gains are not taken into account in calculating the 15% limitation.

The deduction for medical expenses is limited to the amount which exceeds 5% of taxable income (section 18). The taxable capital gain is included in taxable income, and the 5% is therefore based on the greater amount.

The deduction for donations is limited to the greater of R1000 or 5% of taxable income (section 18A). The 5% calculation is therefore also based on taxable income which includes the taxable capital gain.

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