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FAQ: I hold units that are held in income and gilt unit trusts. These pay interest (on which income tax is paid), and which is reinvested.

I hold units that are held in income and gilt unit trusts. These pay interest (on which income tax is paid), and which is reinvested. On selling these units will I have to pay CGT on the difference between the original capital amount and the redeemed amount bearing in mind that this increased amount will include the reinvested interest amount on which income tax has already been paid?

No, income reinvested in the unit trusts will be used to purchase additional units, which will have their own base cost. As an example, assume that you hold 10 000 units with a total base cost of R50 000 and interest of R5 000 is reinvested to purchase an additional 800 units. The total base cost will increase to R55 000 and, if the 10 800 units are sold for R75 000, the capital gain will be R20 000, not R25 000.

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