Personal-use aircraft, boats and certain rights and interests

The vast majority of personal-use assets are excluded from Capital Gains Tax. However, certain assets used mainly for non-trade purposes that are likely to generate substantial capital gains as a result of market forces are included.
Capital gains from assets whose decline in value is mainly attributable to personal consumption are also included. It would be theoretically correct to determine capital gains or losses on the disposal of these assets by reference to a base cost that has been reduced by applying a notional wear-and-tear allowance to reflect personal use and consumption. However, this would be complex for both taxpayers and SARS to administer and, in common with other jurisdictions, losses on disposal are disregarded and only gains in excess of the unadjusted base cost are taxed.
The following assets used for purposes other than the carrying on of a trade fall under this category:
  • An aircraft with an empty mass exceeding 450kg. This would exclude for example, a hang glider or microlight aircraft. It is understood that aircraft with an unladen mass in excess of 450kg have to be licensed as aircraft. The word ‘aircraft’ is not defined and hence will bear its ordinary meaning.
  • A boat exceeding 10 metres in length. The purpose of the 10-metre cut-off is simply to exclude small pleasure craft such as rowing boats, ski boats, small yachts, rubber dinghies and the like which are unlikely to yield capital gains on disposal.
  • Fiduciary, usufructuary or similar interests whose value decreases over time. For example, a husband dies and leaves the bare dominium in his holiday home to his son and the right of use to his wife for the rest of her life.
  • A lease of immovable property. For example, a holiday home acquired under a 99-year lease.
  • Time-share and share block interests with a fixed life whose value decreases over time.
  • Rights or interests in the above assets.
An apportionment on a fair and reasonable basis will be required if an asset of this nature is used for trade and private purposes. Only the trade portion of any capital loss will be allowable.
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