Warning to anyone selling their house in South Africa right now
South African homeowners in the process of selling their primary property may find their profits from the sale are taxed more than they expected.
Among a host of threshold changes announced by Finance Minister Enoch Godongwana in the 2026 budget, the minister increased the Capital Gains Tax exclusion for primary residences from R2 million to R3 million.
For qualifying sellers, this change effectively increases the tax-free portion of the capital gain (profit) realised on the disposal or sale of a “primary residence” in South Africa by R1 million.
According to Robyn Kymdell, Admitted Attorney at Foreign Buyer Property Solutions, using a top marginal capital gains tax rate of 18%, it means a seller will effectively save R180,000.
However, she stressed that the timing of the sale is critical, especially for homeowners who were or are in the process of selling their house around the time of the change.
The tax laws make it clear that the new R3 million threshold applies at the time of the property’s disposal.
“If your sale was concluded before the effective date, you only get R2 million exempt on a primary residency sale,” she said.
“However, where tax law recognises the sale after the effective date, you get R1 million more tax-exempt income.”
In the context of immovable property, Kymdell noted that the time of disposal is not determined by when the transfer is registered or when the purchase price is paid or received.
The timing is determined by when the sale agreement becomes unconditional and fully operative and enforceable under law.
She said this is critical because property transactions are often subject to suspensive conditions, with the simplest and most common example being that the buyer may need to secure a mortgage.
“In such cases, the law determines that the date on which these conditions are satisfied is the point at which the agreement becomes fully operative and enforceable,” she said.
Kymdell provided a practical example as a guideline.
Where the sale agreement was concluded, or the suspensive conditions were fulfilled before 1 March 2026, the R2 million exclusion applies, even if the transfer occurs later.
Where the sale agreement was concluded, or suspensive conditions were fulfilled on or after 1 March 2026, the R3 million exclusion applies.
“If the sale agreement became binding before 1 March 2026 but the transfer was, or is only registered later, unfortunately, only the lower R2 million exclusion still applies,” she said.
Double-check the contracts to see if you’re missing out
In practical terms, sellers who sealed the sale before 1 March lost out.
If a property was sold with a profit of R2.5 million, under the R2 million primary residence exclusion, R500,000 of the profit remains taxable and will be subject to capital gains tax.
However, if the transaction was legally concluded after 1 March 2026, the R3 million exclusion would apply. The full profit falls within the exemption, and no capital gains tax will be payable.
Kymdell noted that many sellers and even agents may not be aware of the threshold change, as it was not included in the promulgated tax laws that took effect from 1 April 2026.
These laws include changes to various rates and taxes, including tax tables.
Instead, the change to the threshold took effect from the date specified by the finance minister in his announcement, in line with the provisions of the Income Tax Act.
Paragraph 45(1A) of the Eighth Schedule to the Income Tax Act provides that where the Minister announces an alteration to the amount of a capital gain or loss:
“…the alteration comes into effect on the date or dates determined by the Minister in that announcement and continues to apply for a period of 12 months from that date, or those dates subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.”
Because of this, Kymdell said that estate agents, accountants or tax advisors shouldn’t get confused and try to look for the changes in the promulgated laws.
As such, she added that sellers, their agents, and advisors need to be sure of where the sale falls to take advantage of the new limits.
“The specific drafting of an agreement can influence when a disposal is regarded as having occurred for tax purposes,” she said.
“Property sale agreements are highly specific, and even small differences in wording or conditions can influence the tax outcome.”
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