(a) If a salaried employee owns a house that he lives in and owns a second property that was let out, is he liable for capital gains tax on the second property which he sold? If a salaried employee owns a house that he lives in and owns a second property that was let out, is he liable for capital gains tax on the second property which he sold?
(b) The same scenario but assume the taxpayer gives the tenant notice on the second property and then moves into the second property and lives in it. He then advertises the second place for sale. Is he liable for capital gains tax on the second property when he sells it?
(c) Is there a period that a person must live in a property for it to be classified as a primary residence?
(a) Yes
(b) Yes, he will be liable for capital gains tax for the period that he let out the residence. Assume the taxpayer let out the property from 1 October 2001 to 30 September 2009 (eight years) and then lived in the residence for another eight years until 30 September 2017 before selling it. He will be liable to capital gains tax on half (8/16) of the overall capital gain on the disposal of the residence. The other half of the overall capital gain will qualify for the primary residence exclusion.
(c) There is no minimum period that a person must live in a residence to claim it as a primary residence. However, the taxpayer must be able to convince SARS that the residence is his or her ordinary residence. A word of warning: A taxpayer who buys and sells properties at short intervals runs the risk of being classified as a property trader in which case any profits on disposal will be taxed in full as revenue gains.
