Tuesday, 03 December 2013 - 20:00
Charts
Seed Weekly - Making use of the CGT Exclusion
A while back I had an interesting conversation with a friend. Every year she sells a portion of her unit trust investments and then immediately reinvests the proceeds into the same fund. Her rational behind this is that every year SARS provides you with Capital Gains Tax (CGT) exclusion and you can use this exclusion to increase the base cost of our investment and reduce your future CGT liability.
How are capital gains calculated?
You make a capital gain if you dispose (sell) and asset for more than the original price (base cost). A simple example is:
• Invest R 1 000 into a unit trust
• Sell the unit trust for a total value of R 1 700.
So can you actually decrease your future CGT by selling a portion of your investment and reinvesting it immediately?
For ease of calculation I have made the following assumptions:
• The investment is a unit trust.
• The returns of an average equity unit trust are used.
• There are no transaction costs.
• One is able to sell and buy the exact same unit trust on the same day.
• Distributions and reinvestments by the unit trust are not taken into account.
I did the calculation on the different sizes of initial investments. Every year you sell a portion of your investment where the CGT is equal to that tax year’s exclusion. In 2006 the exclusion was R 10 000, this tax year it’s R 30 000.
The chart below illustrates how the base cost increases every year for the different portfolios compared to the unit price of underlying investment and base cost of not selling.
You derive the biggest benefit when the portfolio is smaller. The new base cost is calculated using the weighted average of the previous year’s base cost and the price of the “new” investment. With a smaller portfolio you are able to sell a higher ratio of the units and increase the base cost more effectively.
The graph below shows the unrealised capital gains (The capital gains you would make if you were to sell 100% of your portfolio.) for the different portfolios at the end of the 8 year period.
With a R100,000 portfolio it was possible to reduce the unrealised capital gains by 98%, with the R500,000 portfolio by 23% and the R1,000,000 by 12%.
By increasing the base cost of the investment in line with the current price of the unit trust you are able to reduce the unrealised capital gains on the investment and ultimately your CGT liability when making a full disposal of the investment.
This is a very simplistic discussion about how to reduce your CGT liability and makes quite a few assumptions. In reality we would guess that the benefit wouldn’t be as great as illustrated. This strategy would also require a very disciplined investor to put the trades through timeously each year and reinvest the full proceeds from the disposal. It is also very evident that the benefits of this strategy reduce as your portfolio grows.
Kind regards,
Gerbrandt Kruger
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 03 Dec 2013
Top News
South African stocks slid 1.7 percent on Tuesday, with AngloGold Ashanti and other index heavyweights hit by a global market sell-off on concerns the U.S. Federal Reserve may start cutting back its stimulus programme. Full story
South Africa's Bidvest has asked a high court to stop a $1.2 billion takeover bid for local drugmaker Adcock Ingram by a Chilean rival, alleging the planned financing of the offer is against the law. Full story |
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Ukraine's embattled government held onto power in parliament on Tuesday but faced determined public protests and the rising risk of a financial crisis after spurning closer ties with the European Union under pressure from Russia. Full storyNorth Korean leader Kim Jong Un is believed to have dismissed a powerful uncle, a man key to his rise to power, from his posts, South Korean lawmakers said on Tuesday, a move that could help consolidate his power base with a younger guard of aides. Full storyMexican Senate committees on
Tuesday passed an electoral reform demanded by the opposition,
taking Congress a step closer to a bill to open up the oil and
gas industry at the center of President Enrique Pena Nieto's
economic agenda. Full story |
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Markets | Fear that the Federal Reserve
will scale back its stimulus as the U.S. economy recovers hit
world stock markets for a second straight. . . Full story | | Gold rose slightly on
Tuesday, bouncing up after a slide of almost 3 percent the
previous day and a further decline in early. . . Full story | | European stocks dropped on
Tuesday, suffering their biggest falls since August after recent
robust U.S. data raised concern that the Federal Reserve will
cut. . . Full story | | U.S. stocks fell on Tuesday,
sending the S&P 500 index lower for three straight sessions, as
investors speculated the Federal Reserve may move. . . Full story |
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| Miners and oil companies led
Britain's FTSE 100 lower on Tuesday as strong economic data
prompted investors to bet that equity-friendly central bank
stimulus. . . Full story | | U.S. stocks opened lower on
Tuesday, with the S&P 500 down for a third consecutive session,
on concerns the Federal Reserve may begin. . . Full story | | Britain's main benchmark index
fell for second day on Tuesday, led down by heavyweight
materials stocks as metal prices weakened.. . . Full story | | European shares edged lower on
Tuesday, with miners tracking a decline in metals prices and
concerns that the Federal Reserve could start reducing. . . Full story |
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SA Business | The board of South African drugmaker Adcock Ingram said on Tuesday it believed a $1.2 billion takeover bid from Chile's CFR Pharmaceuticals was still the best option for shareholders, rebuffing a. . . Full story | | South Africa's rand retreated against the dollar on Tuesday, weighed down by fears of a wider-than-expected current account deficit.. . . Full story | | A Chilean group's $1.2 billion bid for South African drugmaker Adcock Ingram was challenged on two fronts on Monday, as a group led by Bidvest sought nearly a third of Adcock's. . . Full story |
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| South African industrial conglomerate Bidvest has asked a high court to invalidate a $1.2 billion takeover bid for local drugmaker Adcock. . . Full story | | South Africa's current account deficit widened in the third quarter to its biggest in five years despite positive revisions to trade. . . Full story | | Spending in South Africa grew at its slowest pace in four years in the third quarter of 2013, as strikes, tighter. . . Full story | | The Australian dollar
was on the defensive on Tuesday after the Reserve Bank of
Australia (RBA) reiterated the local currency was still
uncomfortably high,. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 43962.83 | -696.54 | -1.56% | JSE Top 40 | 17:00 | 39194.66 | -676.87 | -1.70% | JSE Gold | 17:00 | 1099.26 | -48.08 | -4.19% | JSE Financial | 17:00 | 32176.37 | -678.41 | -2.06% | JSE Industrial | 17:00 | 58344.66 | -974.57 | -1.64% | JSE Indust 25 | 17:00 | 51077.80 | -904.96 | -1.74% | JSE Resource | 17:00 | 48863.68 | -473.85 | -0.96% | DJ Futures | 19:08 | 15875.00 | -118.00 | -0.74% | DJ Ind | 19:58 | 15901.99 | -106.78 | -0.67% | SP 500 | 19:58 | 1793.48 | -7.42 | -0.41% | Nasdaq | 19:58 | 4034.02 | -11.24 | -0.28% | FTSE 100 | 18:35 | 6532.43 | -62.90 | -0.95% | DAX | 19:08 | 9223.40 | -178.56 | -1.90% | CAC40 | 19:08 | 4172.44 | -113.37 | -2.65% | Nikkei | 08:52 | 15749.66 | 94.59 | 0.60% | Shanghai | 09:28 | 2222.67 | 15.30 | 0.69% | Hang-Seng | 10:28 | 23910.47 | -128.08 | -0.53% | All Ords | 07:45 | 5249.60 | -23.90 | -0.45% | NZSE 50 | 06:48 | 4783.85 | -8.48 | -0.18% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1222.00 | 1.83 | 0.15% | Gold R | 19:59 | 12662.76 | 130.78 | 1.04% | Gold R/kg | 19:58 | 406900 | 963 | 0.24% | Silver $ | 19:59 | 19.0900 | -.0750 | -0.39% | Platinum $ | 19:59 | 1355.90 | 18.40 | 1.38% | Palladium $ | 19:59 | 712.60 | 3.60 | 0.51% | R157 | 17:07 | 6.24 | .00 | 0.08% | R186 | 17:42 | 8.38 | -.04 | -0.53% | R204 | 16:59 | 7.35 | .01 | 0.20% | R207 | 17:33 | 7.64 | .00 | 0.07% | Brent Crude | 19:58 | 112.35 | 2.66 | 2.43% | Rand / Dollar | 19:59 | 10.3630 | 0.0924 | 0.90% | Rand / Pound | 19:55 | 16.9704 | 0.2041 | 1.22% | Rand / Euro | 19:55 | 14.0910 | 0.1857 | 1.34% | Rand / NZD | 19:59 | 8.5539 | 0.1368 | 1.63% | Rand / AUD | 19:55 | 9.4561 | 0.0990 | 1.06% | Yen / Dollar | 19:59 | 102.3670 | -0.5600 | -0.54% | Euro / Dollar | 19:59 | 0.7353 | -0.0033 | -0.45% | Dollar / Euro | 19:59 | 1.3600 | 0.0061 | 0.45% | Pound / Dollar | 19:55 | 0.6093 | -0.0020 | -0.33% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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03/12/2013 | 97 | 291 | 54 | 442 | 240,752,344 | R15,028,386,260 | 180200 | 1250288 | 02/12/2013 | 133 | 222 | 72 | 427 | 142,409,321 | R8,080,749,580 | 95989 | 1289364 | 29/11/2013 | 207 | 154 | 65 | 426 | 200,366,423 | R10,216,853,319 | 92818 | 1221464 | 28/11/2013 | 220 | 144 | 56 | 420 | 230,333,748 | R11,301,241,123 | 115670 | 697655 | 27/11/2013 | 236 | 124 | 56 | 416 | 223,442,544 | R12,612,898,932 | 144773 | 686567 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 39,194.66 | -676.87 | -1.70% | Industrial | 58,344.66 | -974.57 | -1.64% | Mid Cap | 58,886.66 | -469.52 | -0.79% | Small Cap | 49,020.56 | -573.67 | -1.16% | Resource 20 | 48,863.68 | -473.85 | -0.96% | Industrial 25 | 51,077.80 | -904.96 | -1.74% | Financial 15 | 12,107.51 | -310.30 | -2.50% | Financial & Ind. 30 | 53,917.11 | -1098.53 | -2.00% | All Share | 43,962.83 | -696.54 | -1.56% | Oil & Gas | 37,438.47 | -289.08 | -0.77% | Mining | 29,251.09 | -312.04 | -1.06% | Gold Mining | 1,099.26 | -48.08 | -4.19% | Platinum Mining | 47.08 | -.81 | -1.69% | GENERAL MINING | 8,519.53 | -53.75 | -0.63% | Oil & Gas Producers | 20,129.98 | -155.43 | -0.77% | Basic Materials | 25,996.20 | -289.71 | -1.10% | Chemicals | 23,418.24 | 50.77 | 0.22% | Forestry & Paper | 26,913.17 | -556.89 | -2.03% | Industrial Metals | 22,215.92 | -294.86 | -1.31% | Industrials | 42,715.71 | -694.12 | -1.60% | General Industrials | 128.25 | -2.31 | -1.77% | Consumer Goods | 54,769.80 | -761.82 | -1.37% | Automobiles & Parts | 8,469.07 | -63.41 | -0.74% | Household Goods | 263.73 | -11 | -3.96% | Health Care | 73,653.20 | -1284.61 | -1.71% | Beverages | 176.26 | -.87 | -0.49% |
| | Index Name | RP | Move | % Move | Food Producers | 68,056.09 | -1307.47 | -1.88% | Personal Goods | 1,016.14 | -21.18 | -2.04% | Consumer Services | 10,284.36 | -152.39 | -1.46% | General Retailers | 61,022.31 | -958.54 | -1.55% | Travel & Leisure | 5,466.79 | -38.58 | -0.70% | Media | 211.90 | -2.47 | -1.15% | Support Services | 2,499.37 | -19.88 | -0.79% | Telecommunications | 9,122.18 | -284.90 | -3.03% | Financials | 32,176.37 | -678.41 | -2.06% | Banks | 54,208.32 | -1335.18 | -2.40% | Non-life Insurance | 47,726.53 | .00 | 0.00% | Life Insurance | 31,158.57 | -1006.16 | -3.13% | General Financial | 3,165.42 | -37.45 | -1.17% | Technology | 44,675.86 | -145.37 | -0.32% | SHARIAH TOP40 | 3,640.56 | -60 | -1.62% | FTSE/JSE SHARIAH ALL | 3,779.38 | -57 | -1.48% | COAL MINING | 17,679.93 | -262 | -1.46% | FTSE JSE Fledgling | 6,171.02 | -20 | -0.32% | FTSE/JSE Alt X | 1,085.38 | -24 | -2.16% | SA LISTED PROPERTY | 489.63 | | -1.08% | CAPPED PROPERTY | 417.62 | | -0.84% | RESOURCE | 26,674.55 | -270 | -1.00% | DIVIDEND PLUS | 211.62 | -3 | -1.45% | FTSE/JSE RAFI 40 | 8,620.58 | -161 | -1.84% | Capped Top 40 | 20,708.95 | -368 | -1.74% | Capped All Share | 22,259.56 | -355 | -1.57% | JSE TABACO | 6,903.70 | -31 | -0.45% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | CFR | COMPAGNIE FIN RICHEMONT | HOLD | 02/12/2013 | REM | REMGRO LIMITED | HOLD | 02/12/2013 | ABL | AFRICAN BANK INVESTMENTS ... | BUY | 29/11/2013 | APN | ASPEN PHARMACARE HLDGS | HOLD | 29/11/2013 | AIP | ADCOCK INGRAM HLGS LD | HOLD | 29/11/2013 |
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Results Expected** Expected | Company Name | Fin. Date | 10/12/2013 | MICROMEGA | September 2013 (Interim) | 10/12/2013 | ZCI | September 2013 (Interim) | 13/12/2013 | EHSV | September 2013 (Q) | 13/12/2013 | FIUUNIT | September 2013 (Q) | 13/12/2013 | INDEQTY | September 2013 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | AMECOR | 02/12/13 | 18/12/13 | 30/12/13 | ZAR 0.0650 | LIBHOLD11 | 02/12/13 | 18/12/13 | 30/12/13 | ZAR 0.0550 | JDG CONV | 29/11/13 | 06/12/13 | 20/12/13 | ZAR 375.0000 | PRESCIENT | 28/11/13 | 17/01/14 | 27/01/14 | ZAR 0.0250 | OMNIA | 26/11/13 | 10/01/14 | 20/01/14 | ZAR 1.8500 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | INVPREFR | 21/11/13 | 29/11/13 | 17/12/13 | ZAR 4.0486 | INVESTEC-P | 25/11/13 | 29/11/13 | 17/12/13 | ZAR 3.5512 | INVLTDPREF | 21/11/13 | 29/11/13 | 17/12/13 | ZAR 3.3143 | ABIL PREF | 11/11/13 | 29/11/13 | 09/12/13 | ZAR 3.0800 | SPAR | 13/11/13 | 29/11/13 | 09/12/13 | ZAR 3.0600 |
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Upcoming AGMs** Code | Company Name | Date | Status | APN | Aspen Pharmacare Holdings Ltd. | 03/12/2013 | Confirmed | APNP | Aspen Pharmacare Holdings Ltd. | 03/12/2013 | Confirmed | FSR | FirstRand Ltd. | 03/12/2013 | Confirmed | FSRPA | FirstRand Ltd. | 03/12/2013 | Confirmed | FSRP | FirstRand Ltd. | 03/12/2013 | Confirmed |
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