Page 18 - F6 Slides (CGT,TT,ET AND PT)

Disposal of small business assets exclusion

• The purpose of this exclusion contained in par 57 is to provide relief to small business persons
who have invested their resources in their active business assets .

• The definition of an ‘active business asset’ refers to both immovable property and assets other
than immovable property. If the active business asset constitutes an asset other than immovable
property, the asset must be used or held wholly or exclusively for business purposes.

• On the other hand, if the active business asset constitutes immovable property, it does not have
to be held wholly or exclusively for business purposes. The R1,8 million exclusion will then apply
only to the extent that the immovable property is held for business purposes.

• This means that if, for example, 30% of the property is used for the small business and 70% for
private purposes, then only 30% of the gain will qualify for the R1,8 million exclusion.

• Please note that the definition of an active business asset specifically excludes l

 financial instruments (for example shares), and
 assets held mainly to derive annuities, rental income, foreign exchange gains, royalties or similar income (par
57(1)).