How to work out my capital gain

[ros_b]

I sold some Satrix shares in the last tax year and I need to try and work out what the capital gain was, in order to calculate my capital gains tax liability. Things are complicated by the fact that three years ago, I moved the shares from the Satrix Investment Plan to my own online stockbroking account with one of the banks. I can't find any records from Satrix when I moved the shares, and my stockbroking account lists the price of the shares on the day I transferred them. But that's not what the shares cost me. So, there are a few questions arising out of this:

1. I did actually keep a record of my Satrix purchases - it was only four lump-sum amounts. But while I was still with the Satrix Investment Plan, all of my dividends were re-invested, so there were dozens of additional purchases done automatically by Satrix. There's no way I can figure all of this out.

2. What about all of the other costs associated with these purchases - brokerage, etc, and what about the administration fees charged by the Satrix Investment Plan? What am I entitled to include in the "cost" of the shares?

3. How do I prove to Sars what the cost of the shares was? In other words, how do I substantiate the amount of the capital gain that I'm declaring? Sure, I can prove what I sold the shares for, via my stockbroking account statement, but how can I substantiate what I bought them for?

 

[Hendrix]

I don't know what order to answer you in, but I'll try keep it simple...

The first R30k Capital Gain is exempt from tax, thereafter 33% of the capital gain is added to your income, so if your marginal tax rate is 40%, you will in effect only pay a max of 13.3% tax on the capital gain after the R30k exemption. (33% - 40% = 13.3%)
Your Broker should provide you with a tax certificate to show how much your capital gain was, and you will declare this on your tax return, speak to them...

Now regarding the shares you transferred from the Satrix Investment Plan to your broker, I assume it was transferred directly to your brokerage account and not sold and rebought, so no capital gains event was triggered, so you fine...

Regarding the dividends, don't worry about that tax, as Satrix would have paid over 15% Dividend Withholding Tax on your behalf, they must do this by law, so the money that was reinvested to buy more shares was already taxed.
You just need to declare this on your tax return, once again, speak to satrix for a tax certificate.

Hopefully I answered all you needed to know

 

[Hendrix]

I don't know what order to answer you in, but I'll try keep it simple...

The first R30k Capital Gain is exempt from tax, thereafter 33% of the capital gain is added to your income, so if your marginal tax rate is 40%, you will in effect only pay a max of 13.3% tax on the capital gain after the R30k exemption. (33% - 40% = 13.3%)
Your Broker should provide you with a tax certificate to show how much your capital gain was, and you will declare this on your tax return, speak to them...

Now regarding the shares you transferred from the Satrix Investment Plan to your broker, I assume it was transferred directly to your brokerage account and not sold and rebought, so no capital gains event was triggered, so you fine...

Regarding the dividends, don't worry about that tax, as Satrix would have paid over 15% Dividend Withholding Tax on your behalf, they must do this by law, so the money that was reinvested to buy more shares was already taxed.
You just need to declare this on your tax return, once again, speak to satrix for a tax certificate.

Hopefully I answered all you needed to know

 

[jem]

Under correction:

1. I did actually keep a record of my Satrix purchases - it was only four lump-sum amounts. But while I was still with the Satrix Investment Plan, all of my dividends were re-invested, so there were dozens of additional purchases done automatically by Satrix. There's no way I can figure all of this out.

Afaik, the reinvestment would actually work in your favour since it covers the 'intent' test that you bought it as capital investment not trade (think daytrading). Even though the newest purchases may only have been held for a shorter term.



2. What about all of the other costs associated with these purchases - brokerage, etc, and what about the administration fees charged by the Satrix Investment Plan? What am I entitled to include in the "cost" of the shares?

I dont think this can be included... I seem to remember its only on fixed assets, would need to check.

3. How do I prove to Sars what the cost of the shares was? In other words, how do I substantiate the amount of the capital gain that I'm declaring? Sure, I can prove what I sold the shares for, via my stockbroking account statement, but how can I substantiate what I bought them for?

Unfortunately you will need to prove this... IF they ask... Just remember your cap gains exemption is like ~30k so unless you exceed that sars wouldnt care. Don't you have any records of the original purchases? Not even bank transfers on statements or something? Also it depends on married in or out of community.

 

[ros_b]

Your Broker should provide you with a tax certificate to show how much your capital gain was, and you will declare this on your tax return, speak to them...

The only thing I have from my broker is a statement that lists the amount of all of my share purchases fr the year, and the amount of all of my share sales for the year. That is *not* what my capital gain is for the year, according to my understanding. If during the last tax year I bought R100 of Share A and sold R300 of Share B, I have not made a capital gain of R200. The capital gain depends on what I paid for Share B. If I bought Share B four years ago for, say, R500, then in fact I have a capital loss of R200 during the last tax year. So the statement from my broker is useless. Never mind that the shares were transferred over to my broker, so they have no idea what I paid for them.

Regarding the dividends, don't worry about that tax, as Satrix would have paid over 15% Dividend Withholding Tax on your behalf.

I'm not worried about the dividends tax - I understand that it's been paid already. What I'm saying about the dividends, is that the net dividends were re-invested at the time back into Satrix, which means that I was constantly buying more Satrix shares at a cost that I have no idea about. To work out the cost would mean me going back into every statement that I got from Satrix and trying to figure it out. We're talking an investment over four-and-a-half years, so assuming quarterly dividends, we're talking four lump-sum purchases and another 18 smaller purchases. And those statements are not easy to understand either! There are switch in and switch outs between cash funds, admin fees, interest capitalisation and all sorts. It's gonna take me a whole day to try and figure it out, and then I can guarantee that despite my perfectionist nature, there *will* be errors!

Unfortunately you will need to prove this... IF they ask... Just remember your cap gains exemption is like ~30k so unless you exceed that sars wouldnt care. Don't you have any records of the original purchases?

It exceeds the cap gains exemption by quite some margin. I realize that I do, in fact, have full records - I could only find records on my computer from 1 May 2007, but then I realised they used to post out statements before that, and I do have those on file. The thing is - is someone at SARS really going to wade through 18 statements and try and work out whether I've done the calculation correctly?

 

[HavocXphere]

If you're sure that you meet the legal requirements then you can always simply declare it as such and then go through the hassle of getting the docs once (if?) they challenge it later. Thats a pretty high risk strategy though unless you're sure you are right & that you can get the docs when they demand it.

Personally I'd be shouting at SATRIX though...them not being able to provide the info is poor service. Hell I receive random tax docs from my broker and upon careful inspect conclude "oh yes...I'll need these...6 months from now when I file taxes".

 

[ros_b]

Actually, looking more carefully at my Satrix statements, they don't give me the information I need. All it shows is an opening balance of units on a certain date, and the price of those units on that date, and then a closing balance of units on a certain date, and the price of those units on that date. So I can see how many units were added in that period (difference between closing and opening units), but I don't know on what date those units were bought, hence I don't know what the price (ie cost) of those units was.

 

[initroot]

Ask satrix to send your tax certificate or download it on website. Im not sure why your portfolio isnt showing the base cost. If its simple transfer as mentioned you'll be fine. If you need further help, pm me and ill assist with the calc. This depends on how long youve been keeping the shares etc as already mentioned. What broker or platform these days doesn't provide tax certificate it3(c) or b. If its indeed a big amount I would advise you against it without having the proof. SARS has been on a role with audits these days for a number of clients..

 

[ros_b]

Ask satrix to send your tax certificate or download it on website.

I am not with the Satrix Investment Plan any more - I haven't been with them since 2011 when I transferred the units to my own stockbroking account. Can they send me a tax certificate if I'm not a client any longer? They have no idea what my activity was this tax year.

Im not sure why your portfolio isnt showing the base cost.

My stockbroking portfolio shows the cost of the Satrix units on the date that they were transferred. This is NOT the base cost of those units. How can my stockbroker know what I paid for these shares, before I was a registered user with them?

What broker or platform these days doesn't provide tax certificate it3(c) or b.

I have ana IT3b rom m online stockbroking account. It shows amounts for interest, broker trustee fee, Vat, interest ex debentures/prop trust, and dividends. I also have a statement showing dividends, and then a statement that they call "Capital Gains Tax Statement" , but all it shows is all of my purchases and sales for the tax year. That does not help me work out my capital gain liability as far as I understand it. As I explained before, if I buy R500 of Share X in the the year, and I sell R100 of Share Y, I have not made a capital loss of R400. My capital gain or loss depends on what I paid for Share Y whenever I bought it.

 

[initroot]

I have typed a rather long message 3 times already. Screw this.
OP see this if you haven't already.
http://www.sars.gov.za/AllDocs/OpsD...x Guide for Share Owners - External Guide.pdf

At the end of the day you will have to contact satrix in order for them to provide you with the HISTORICAL information you require. Yes, they will obviously have no record of your activities within this year, but you need don't need that so why ask for it. My apologies if I gave a distorted answer.

In short the following are deductible:

The base cost of a share includes –
• the cost of acquisition;
• securities transfer tax or similar tax or duty paid on acquisition of the share;
• the cost of any option exercised in acquiring or selling the shares (except shares
taxed under section 8A or 8C);
• broker’s fees (whether in buying or selling the shares); and
• in the case of a listed share or participatory interest in a portfolio of a collective
investment scheme, one-third of the interest on any loan used to buy the share or
participatory interest.
Fees paid to a portfolio manager to manage your share portfolio do not qualify as part of the
base cost of a share.

If you bought 200 shares X in 2013 and sold 100 shares X in 2013 your tax certificate will not show the base costs.
"Base cost includes those costs actually incurred in acquiring, enhancing or disposing of an asset that are not allowable as a deduction from income. Thus, the base cost of trading stock would generally be nil because its cost would have been deducted from income."
Just to add on this also, the IT3(c) usually comes with a fineprint " proceeds on disposal ..... in the statement will not automatically result in proceeds being of capital nature."

So once again its up to you to prove the intent.

From what I gather this is of capital nature, you will have to get the base costs from satrix, if that fails,
you are going to have to unfortunately determine it as follows:
Proceeds = Capital Gain
Capital gain - annual exclusion = Taxable Amount
Taxable Amount x 33.3% = Amount taxable to be included in return.

Base cost should be determined on any of the following three methods:
•specific identification;
• first in, first out; and
• weighted average.

I hope any of this is of use to you.