Primary Residence Capital Gains Tax Exemption Increased to R3 Million
During the recent budget speech, Enoch Godongwana, the Minister of Finance of South Africa, announced an increase to the primary residence capital gains tax (CGT) exclusion.
From 1 March 2026, the exclusion has increased from R2 000 000 to R3 000 000 per taxpayer.
This change is significant for homeowners and property investors as it increases the amount of profit that can be excluded from capital gains tax when selling a primary residence.
How the Primary Residence Exclusion Works
Capital gains tax is generally triggered when a property is sold. The capital gain is calculated by subtracting the purchase price and certain allowable costs from the selling price.
Example
Assume the following scenario:
A property was purchased for R2 000 000
The property is later sold for R8 000 000
The basic capital gain would therefore be:
R8 000 000 – R2 000 000 = R6 000 000
If the property is owned equally by two taxpayers, the capital gain is split between them.
Each owner would therefore have a gross capital gain of:
R3 000 000 each
With the new primary residence exclusion of R3 000 000 per taxpayer, this could potentially mean that no capital gains tax is payable, depending on the final calculation.
Deductible Costs
Before the exclusion is applied, certain actual and verifiable expenses can be deducted from the capital gain. These may include:
Transfer duty paid when purchasing the property
Legal fees on acquisition
Estate agent commission on sale
Compliance certificate costs
Capital improvements to the property
Certain necessary maintenance costs
It is important that these expenses are properly documented and verifiable, as they must be supported if required by South African Revenue Service.
Why This Matters
The increase in the primary residence exclusion provides additional tax relief for homeowners, particularly given the significant growth in property values over time.
However, the calculation of capital gains tax can still become complex, especially where:
A property has been owned for many years
There have been multiple improvements
The property was not always used as a primary residence
There are multiple owners
Disclaimer
The purpose of this post is to be informatory with regards to the latest changes regarding the capital gains exemption. It is advised that you consult a tax practitioner regarding all tax related queries.
Need Assistance?
If you are planning to sell a property or would like assistance understanding how capital gains tax may apply to your situation, it may be advisable to obtain legal or tax advice before proceeding with the sale. Contact Dewar Attorneys today for assistance with your property’s sale.
Author: David Dewar
Email David at: David@dewarattorneys.com