Do I need to file a tax return?

Question: I am 65 years old so my taxable income threshold is R114 800. I earn some interest income (less than R10 000) and dividend income which is already deducted at source and well within the taxable income threshold.

My question is the following: I have sold some shares and incurred a capital gain of R49 132 in the tax year ending 29 February 2016. How much is exempt from tax and do I have to complete a tax return as a result of this capital gain incurred?

Answer: An income tax return must be furnished by every natural person who had capital gains or capital losses exceeding R30 000. These terms are defined in the Income Tax Act and a person’s capital gain for a year of assessment, in respect of the disposal of an asset during that year, is equal to the amount by which the proceeds received or accrued in respect of that disposal exceed the base cost of that asset. In other words, the capital gain before the annual exclusion (you refer to it as the exemption) of R30 000.

The gross income (or “taxable income threshold” that you refer to) of a person, who at the end of the 2015 year of assessment was 65 years or older (but under the age of 75) was a gross income amount of R110 200. This amount has not yet been made available for 2016, but we expect this amount to be R114 800 (as you also say).

The gross amount of the interest and the dividend must be added to the other gross income. In short, we don’t know if you qualify for this, but because of the capital gain, you have to submit a return.

Your taxable capital gain, if you don’t have any capital losses carried forward from 2015, will be R49 132 minus R30 000 = R19 132. This will then be included in your taxable income at a rate of 33.3%, ie, R6 370.95. At a tax rate of 18%, the marginal tax will be R1 146.77. The overall tax liability is reduced by the rebates, which include the medical contribution and medical expense rebates.