The disposal of common property under a sectional title scheme
It sometimes happens that the common property in a sectional title scheme is surplus to the requirements of the owners and is disposed of with attendant CGT consequences.
Section 16 of the Sectional Titles Act 95 of 1986 provides as follows:
‘16. Ownership of common property.—(1) The common property shall be owned by owners of sections jointly in undivided shares proportionate to the quotas of their respective sections as specified on the relevant sectional plan.’
It follows that it is the sectional title holders who must account for the CGT consequences of the disposal of common property, and not the body corporate.
The part-disposal rules in para 33 will have to be applied to allocate a portion of the base cost to the common property disposed of. The primary residence exclusion will not be available because the residence itself has not been disposed of which is a requirement of para 45 read with para 46(c). However, to the extent that it has not been utilised against other capital gains and losses, the annual exclusion will be available. While the levy income of a body corporate or share block company may be exempt under s 10(1)(e), the exclusion provided by para 64 will not be applicable since the disposal is by the sectional title unit holders, not by the body corporate.
What happens if you and your spouse hold a primary residence jointly?
The primary residence exclusion (R2 000 000 in 2013 & 2012) is divided according to the interest each of you hold in the primary residence. For example, if you and your spouse have an equal interest in your primary residence, you will each qualify for a primary residence exclusion of R1000 000. You will also each be entitled to the annual exclusion (2013: 30000; 2012: 20000; 2009: R16 000; 2008: R15 000).