10. 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? 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 the second property. He then advertises the second place for sale. Is he liable for capital gains tax on the second property when he sells it? Is there a period that a person must live in a property for it to be classified as his permanent residence?
Yes
Yes, he will be liable for capital gains tax in respect of that period that he let out the residence. Assume the taxpayer let out the property from 1 October 2001 to 30 September 2002 and then lived in the residence for another two years before selling it. He will be liable to capital gains tax in respect of one third of the capital gain on the disposal of the property. There is no minimum period that a person must live in a residence to claim it as his primary residence. However, that 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 trader in properties in which case any profits on disposal will be taxed in full.
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