Planning to sell your residential property? The right documentation can make a significant difference to your tax liability.
Effective from 1 March 2026, the primary residence exclusion has increased to R3 million.
However, proper documentation of your property’s purchase price and capital improvements remains essential to determining your correct tax position.
1. The Primary Residence Exclusion
When an individual disposes of a qualifying primary residence, the first R3 million of the capital gain may be excluded from CGT. The exclusion is subject to specific requirements, including that the property is ordinarily occupied as the owner’s main residence and used mainly for domestic purposes. It may be limited where the property was rented out, used for business purposes or not occupied as a primary residence throughout the ownership period. The exclusion generally does not apply where the property is owned by a company or an ordinary trust.
2. Why Your Capital Improvements Matter
Your capital gain is calculated by deducting the property’s qualifying base cost from the sale proceeds. Base cost may include:
- Original purchase price and qualifying acquisition costs.
- Transfer duty and conveyancing costs.
- Qualifying capital improvements, such as extensions, swimming pools, garages and permanent renovations.
- Qualifying costs directly associated with the sale, such as estate agent’s commission.
Routine repairs, maintenance, municipal rates, insurance and bond interest generally do not qualify as base cost.
3. Keep Supporting Documentation
If you have improved your property over the years, ensure that you retain evidence of the expenditure. Relevant documents include:
- Original purchase and transfer documents.
- Invoices and proof of payment for renovations and improvements.
- Building plans and municipal approvals, where applicable.
- Contractor agreements, quotations and bank statements.
- Estate agent’s commission statements and transfer statements.
Qualifying improvement expenditure must meet the relevant tax requirements and generally still be reflected in the property’s state or nature when sold. Unsupported estimates may not be accepted by SARS.
4. The Impact on Your Tax Liability
Consider a property sold for R6 million, with a qualifying base cost of R2 million and qualifying capital improvements of R800,000. The resulting capital gain is R3.2 million. After applying the R3 million primary residence exclusion, the remaining capital gain is R200,000, before any other applicable exclusions or adjustments. If the R800,000 improvement costs cannot be substantiated and are excluded, the remaining gain after the primary residence exclusion could increase to R1 million.
Proper records can therefore make a significant difference to your CGT calculation.
How C2M Can Assist
Before selling your property, we recommend reviewing your base cost, gathering supporting documents and confirming whether the primary residence exclusion applies to your circumstances.
C2M can assist with assessing qualifying costs, determining the applicable exclusions and preparing a CGT calculation to help you establish your tax position before the sale is finalised.
Planning ahead can help prevent avoidable tax costs. Contact C2M before you sell.
Kind regards,
The C2M Team