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Separating assets at the time of divorce also has capital gains tax implications for the parties to the divorce.
There are roll-over provisions applicable to spouses who are divorced or separated provided that certain legal formalities are complied with. These are summarised in the table below.
Legal formalities for divorce
| Type of marriage | Legal formalities required for tax-free roll-over |
| Marriage or customary union recognised under the laws of the republic | Divorce order |
| Religious marriages | Agreement of division of assets which has been made an order of court |
| Permanent same sex or heterosexual unions |
Non-resident spouses and anti-avoidance
There is an anti-avoidance measure that prevents a tax-free roll-over to a non-resident spouse except in the case of
- immovable property situated in South Africa or any interest or right of whatever nature to or in such property including rights to variable or fixed payments as consideration for the working of, or the right to work mineral deposits, sources and other natural resources; or
- any asset effectively connected with a permanent establishment in South Africa.
Since the latter assets fall within the tax jurisdiction of South Africa even for non-residents, there is no need to preclude them from the roll-over relief conferred.
Example – Transfer of assets to non-resident spouse
Facts:
Bruce and Sheila plan to immigrate to Australia. Sheila has no CGT assets and is the first to emigrate so as to set up their new home in Perth. After she has left Bruce transfers the following assets to Sheila:
| Base cost | Market Value | |
| R | R | |
| Holiday home at Plettenberg Bay | 1 000 000 | 2 000 000 |
| Listed shares | 2 500 000 | 5 000 000 |
Result:
Bruce will be subject to CGT on the capital gain of R2 500 000 on the transfer of the shares under para 38, while Sheila will be liable for CGT only when she disposes of the Plettenberg Bay property.
