Sole Prop - Selling Personal Belongings?

[Intothedeepbluesea]

Out of the blue last year I had to move city and was forced to down scale and sell a fair amount of my personal belongings, furniture/electronics/musical instruments etc, all and all around R70,000 worth.

I'd like to plan now for the eventuality of paying tax on this amount , I run a sole prop that sells mainly electronics and a few other bits and bobs online, some of the personal belongings I sold would be what I would normally sell on the business side which doesn't makes it easy to clearly delineate them from business sales. Anyone have any idea how the sale of these personal goods will be taxed and how should it be recorded on my return, considering I don't have any paperwork/invoices for the transactions?

[Intothedeepbluesea]

Anyone?

[CLIVE-TRIANGLE]

personal belongings, furniture/electronics/musical instruments etc

The sale of these items are not taxed in any way.

[wynn]

The sale of these items are not taxed in any way.

Theoretically you already paid tax on the money earned to buy these goods in the first place, so it shouldn't attract tax now that you are selling it.

[dellatjie]

Personal use assets are one of the disposals excluded from capital gain, therefore these gains will not be included in your taxable income:

"53)Personal-use assets

1)A natural person or a special trust must disregard a capital gain or capital loss determined in respect of the disposal of a personal-use asset as contemplated in subparagraph (2).



2)A personal-use asset is an asset of a natural person or a special trust that is used mainly for purposes other than the carrying on of a trade.



3)Personal use assets do not include—

a)a coin made mainly from gold or platinum of which the market value is mainly attributable to the material from which it is minted or cast;

b)immovable property;

c)an aircraft, the empty mass of which exceeds 450 kilograms;

d)a boat exceeding ten metres in length;

e)a financial instrument;

f)any fiduciary, usufructuary or other like interest, the value of which decreases over time;

g)any contract in terms of which a person, in return for payment of a premium, is entitled to policy benefits upon the happening of a certain event and includes a reinsurance policy in respect of such a contract, but excludes any short-term policy contemplated in the Short-term Insurance Act;

h)any short-term policy contemplated in the Short-term Insurance Act to the extent that it relates to any asset which is not a personal-use asset; and

i)a right or interest of whatever nature to or in an asset envisaged in items (a) to (h)."

[Intothedeepbluesea]

But isn't the taxman just going to look at my gross income/bank statements and want to tax the lot?
How's the taxman going to differentiate between legitimate sales and the sales of my own goods, from what I understand if it comes to the crunch the taxman will want to tax the lot, otherwise how would the taxman want/expect me me to show the goods sold were my personal belongings?
I'm assuming something like invoices showing ownership period(ie shows the items were not bought and resold in a short period like a stock item)etc, I do have a few invoices but not many.

[Greig Whitton]

But isn't the taxman just going to look at my gross income/bank statements and want to tax the lot?

No. The taxman is going to look at your tax return and the taxable income that you declare. And the taxable income that you declare will exclude the proceeds from the personal assets that you sold, as dellatjie kindly explained.

[Intothedeepbluesea]

I understand that but SARS now double checks the tax returns you make with your bank statement, aren't they going to ask about a R70k discrepancy?
I suppose I might be making a mountain out of a mole hill, in the grand scheme of things R70k is not a significant amount of money considering the amounts SARS may typically be dealing with, but in terms of my rather puny income it's not totally insignificant and I'd rather do things the right way. On the ITR12 there is a place to fill out for income you deem non taxable, is that where I would include stuff like this? Or do I just leave it out and hope I don't get audited?

[CLIVE-TRIANGLE]

I understand that but SARS now double checks the tax returns you make with your bank statement, aren't they going to ask about a R70k discrepancy?

Actually no they don't, and even if they did you clearly have an explanation.

Another 6 zeros added to your numbers might have raised an eyebrow.

I'd rather do things the right way.

Ignoring it is the right way. The Act addresses it and excludes it from CGIT.

[Intothedeepbluesea]

Ok thanks chaps, is a weight off my mind!

[Dave A]

...I'd rather do things the right way.

To assist clarity, may I suggest you operate separate personal and "business purposes" bank accounts, then.

You don't have to, but it is good practice.

[Intothedeepbluesea]

To assist clarity, may I suggest you operate separate personal and "business purposes" bank accounts, then.

You don't have to, but it is good practice.

I started doing that at the beginning of this year, Capitec is a perfect option for a personal acc.