You might have boggled your mind whether the proceeds of your business are subject to tax; Tony Davey of Tony Davey & Associates responded to a 59 year old woman who paused the below question:
Q. Are the proceeds of the sale of a business taxable? The amount is R120 000 and I am 59 years old?
Below is a response from Tony Davey, a Lawyer who also completed an Honors degree in Taxation at Wits, a Masters in Commercial Law at UNISA and a post graduate diploma in international tax at the University of Johannesburg.
Answer: the sale of a business is a capital gains tax (CGT) as distinct from income tax event as a business is classifies as an asset.
Bear in mind that it is not the full sale proceeds which are subject to CGT, but the capital gain element only, being the sale price less the acquisition price or original cost.
Fortunately for you, there is a special concession (paragraph of the 18th schedule to the Income Tax Act) where a capital gain is made on the disposal of small business assets
Provided that the market value of the assets does not exceed R10m, then the first R1.8m of capital gain is exempt.
Further qualifying criteria is that the owner(s) must have held the business for five years, be substantially involved in such and have attained at least age 55.
Toney Davey is a financial and tax services expert with 25 years of experience in finance and tax sectors. Davey can be contacted on 011 778 4638/9 or 083 616 0965 or alternatively send an email to email@example.com, firstname.lastname@example.org