Satrix CGT "let off some steam" strategy

[Need4Speed]

Satrix CGT "let off some steam" tax strategy

Ok, here's my latest scheme to avoid paying too much CGT:

Let's say I've got a few bars sitting in Satrix funds. The individual CGT annual exclusion rate of R30k (for 2013) apply here.

Does it make sense to cycle a third of the funds out and then back into these funds to realise a capital gain each tax year? That way I get the benefit of the R30k exclusion while keeping the stock invested for 3 years (as required by law).

I guess this question boils down to how Satrix calculates the "base cost" of the underlying shares.

 

[Cius]

Second thing to think about is if you are classified as an investor or a trader by SARS. If you buy and sell too often that will change and then you are taxed as a trader rather than as an investor. That can make a large difference I hear.

 

[rudig]

If you're cycling a third of a few bars annually, you have to consider whether the transaction fees and the risk of SARS deeming your shares being for speculative purposes (and thus not being "capital" but rather "income") are worth the tax benefit.

 

[Freaksta]

Pretty sure there is a section in the tax act that says if you sell and re acquire then the gain is disregarded and the base cost is the old base cost. Can't remember what it applies to!

 

[HavocXphere]

Rule 1) If you're not a finance person then SARS always thought of your scheme before you
Rule 2) If by some miracle you think of something they didn't then s80 catches it, making it tax evasion & you pay 200% penalty
Rule 3) Do not talk about fight club

In this particular case you've got just about everything back to front, so all 3 rules apply. Someone else can elaborate...

edit: for the record, cius is closest to the mark so far

 

[undesign]

The fiscus thanks you for the additional income tax to be generated.

So you have a few million in Satrix...but want to utilise a R30k annual CGT exemption...and don't have a proper tax advisor?

 

[DJ...]

Not sure if serious or stupid...

 

[AlmightyBender]

The fiscus thanks you for the additional income tax to be generated.

So you have a few million in Satrix...but want to utilise a R30k annual CGT exemption...and don't have a proper tax advisor?

These were my immediate questions

 

[brianj74]

Easier to switch some funds and rebase your investment

 

[Need4Speed]

Second thing to think about is if you are classified as an investor or a trader by SARS. If you buy and sell too often that will change and then you are taxed as a trader rather than as an investor. That can make a large difference I hear.

Hold on to a share for 3 years and it is automatically regarded as capital gain, hence the 1/3 each year.

Pretty sure there is a section in the tax act that says if you sell and re acquire then the gain is disregarded and the base cost is the old base cost. Can't remember what it applies to!

This might pose a problem...Thanks for bringing this to my attention.

That's why I'm asking, because I don't know exactly how the base cost is calculated.

 

[HavocXphere]

I don't know exactly how the base cost is calculated.

Indeed. I know exactly the piece of info you're looking for, but there is zero chance of me providing it. A little bit of knowledge is often much worse than zero knowledge. You're in over your head & don't know enough to realize even that. Allow me to demonstrate:

Even after you've been given the exact section number in the income tax act (well one of them anyway) that sinks your plan:

s80 catches it, making it tax evasion & you pay 200% penalty

You ignore that (or just don't comprehend it?) and instead repeat (!) your initial question - hoping perhaps for a different outcome on 2nd try erm. A question which by the way is wrong in itself too (Base cost calculation & 3 year rule criteria are entirely different concepts).

Leave the clever tax schemes to the tax people & the surgery to the surgeons...or at least make a youtube video of it to act as part entertain/part warning to others. I must admit though, I don't know whether they allow cameras to be brought into arbitration / tax court. Maybe if its declared as being for educational purposes?