Capital Gains Tax (CGT) applies when you sell or dispose of a business asset for more than its cost base. This includes property, shares, business goodwill and other capital assets. Understanding CGT is important for business planning - especially if you are considering selling your business, disposing of significant assets or restructuring. Many countries offer concessions or discounts for small businesses and long-held assets.
Identify whether the asset is a CGT asset (most business assets are)
Calculate the cost base (purchase price + acquisition costs + capital improvements)
Determine the capital proceeds (sale price or market value)
Calculate the capital gain or loss (proceeds minus cost base)
Check if you qualify for any CGT discounts or concessions
Apply the appropriate discount (e.g., 50% discount for assets held over 12 months in Australia)
Include the net capital gain in your tax return
Offset capital losses against capital gains where permitted
Businesses in South Africa operating under the VAT system must meet these compliance requirements set by SARS:
Not keeping records of the original cost base and improvement costs
Forgetting that CGT applies to business goodwill when selling a business
Not applying available small business CGT concessions
Missing the 12-month holding period for the CGT discount by disposing too early
Not offsetting capital losses against gains in the correct order
Confusing capital gains with ordinary income for tax reporting
SortBooks connects to your Xero account and finds transactions sitting in catch-all accounts. AI suggests the right account and tax code, learning from your own past coding. You approve it and SortBooks updates Xero. Reconciled transactions are locked by Xero, so those stay in SortBooks with an Open in Xero link.
AI suggests a category and VAT code for each transaction. You approve it before anything changes in Xero.
Growth and above get a quarterly GST/VAT estimate to check before you lodge with SARS.
Ask about your P&L, cash and who owes you, using live Xero data. Every dollar figure is checked against Xero.
CGT applies whenever you sell or dispose of a business asset for more than its cost base. This includes selling business premises, shares, goodwill, intellectual property and other capital assets. It also applies when you sell your business as a going concern.
Yes. Most countries offer concessions for small businesses. Australia has four specific small business CGT concessions that can significantly reduce or eliminate CGT. The UK has Business Asset Disposal Relief. The US has qualified small business stock exclusions. Check your country's specific concessions.
SortBooks correctly categorises asset purchases, improvements and disposals in Xero. It maintains an accurate asset register that records cost bases, enabling you and your accountant to calculate CGT accurately when an asset is disposed of.
AI suggests, you approve, SortBooks updates Xero. Try it free for 14 days.