The 2026/2027 tax year introduces a significant change to capital gains tax (CGT) in South Africa, namely the increase of the primary residence exclusion from R2 million to R3 million. While the structure of CGT remains unchanged, this adjustment has a direct and favourable impact on property owners disposing of their primary residences.
The additional R1 million exclusion
The most immediate effect of the increased exclusion is a reduction in the taxable portion of a capital gain realised on the sale of a primary residence. Under the previous threshold, only the first R2 million of the gain was exempt from CGT. The additional R1 million exclusion now allows homeowners to realise a larger portion of their profit tax-free. In practical terms, this means that many property owners, particularly those in the mid-market segment, may no longer incur any CGT liability upon sale, depending on the size of the gain.
For higher-value properties, while CGT may still be payable, the increased exclusion reduces the overall tax burden and improves the net proceeds from the transaction. This is especially relevant in a market where long-term property appreciation has resulted in larger capital gains over time.
Timing of property salesÂ
The change also places a renewed emphasis on timing. The increased exclusion applies to disposals in the 2026/2027 tax year and onwards. Property owners who were considering selling may benefit from ensuring that their transaction falls within this period in order to take advantage of the higher exemption. Conversely, transactions finalised prior to the effective date would not benefit from the increased threshold.
It is important to note that the existing qualifying criteria for the primary residence exclusion remain in place. The property must still be ordinarily occupied as a primary residence, and adjustments may apply where the property has been used for purposes other than private residence, such as rental or business use. These factors can affect the extent to which the full R3 million exclusion is available.
Tax planning still importantÂ
While the increase is a welcome development, it does not eliminate the need for careful tax planning. Each transaction must still be considered on its own facts, taking into account ownership structures, periods of use, and the timing of disposal.
Speak to a Property Law expert
At Abrahams & Gross, we advise property owners to assess their position in light of the 2026/2027 changes to ensure that they fully benefit from the increased exclusion while remaining compliant with applicable tax requirements. Our experienced Conveyancing and Property Law team is ready to assist with any property related queries.
For Conveyancing and Property Law expertise
Nicholas Hayes        nicholas@abgross.co.za
Farzanah Mugjenkar   farzanah@abgross.co.za
Marita Swanepoel      marita@abgross.co.za
David Kagan          dgkagan@abgross.co.za
Disclaimer
The articles on these web pages are provided for general information purposes only. Whilst care has been taken to ensure accuracy, the content provided is not intended to stand alone as legal advice. Always consult a suitably qualified attorney on any specific legal problem or matter.