South Africa’s 2026 Budget Speech introduced amendments to capital gains tax (CGT) that will have direct implications for the taxation of deceased estates.
Zasha de Lange
Manager Trust and Deceased Estate Tax Compliance
From an estate tax administration perspective, the most notable change is the increase in the CGT exclusion applicable in the year of death, which has been raised from R300 000 to R440 000.
While this adjustment provides some relief, its practical impact on high-net-worth estates is more limited when considered within the broader framework of estate taxation.
Application of the CGT Exclusion at Death
Upon death, a taxpayer is treated as having disposed of their assets at market value (subject to specific exclusions), which triggers a CGT calculation.
The increased exclusion is applied in the deceased’s final income tax return and reduces the taxable capital gain arising from the deemed disposal of assets at date of death, in terms of the Income Tax Act 58 of 1962.
Interaction Between CGT and Estate Duty
The CGT liability that arises from this deemed disposal becomes a debt of the estate and is deductible when determining the net value of the estate for estate duty purposes under the Estate Duty Act 45 of 1955. This creates an inherent link between CGT and estate duty, requiring both taxes to be considered together when assessing the overall tax exposure of a deceased estate.
A key consequence of this interaction is that a reduction in CGT does not translate into a full net saving. A lower CGT liability reduces the deduction available for estate duty purposes, which may result in a marginal increase in the dutiable value of the estate.
Compliance and Reporting Obligations
From a compliance perspective, executors and tax practitioners must ensure that all assets held at the date of death are declared to the South African Revenue Service (SARS), even where the CGT exclusion reduces or eliminates the tax liability. The deemed disposal rules require disclosure of both the base cost and market value of assets in the final income tax return to ensure that the capital gain is correctly determined.
The exclusion is applied only after the capital gain has been calculated and does not remove the obligation to report the underlying asset information.
Treatment of Transfers to Spouses and Beneficiaries
This reporting requirement extends to assets transferred to a surviving spouse or distributed to beneficiaries. In the case of transfers to a surviving spouse, rollover relief may apply, deferring the CGT liability. However, these assets must still be disclosed in the CGT schedule submitted with the final return.
Similarly, where assets are distributed to heirs during the administration of the estate, proper disclosure is required to reflect how the capital gain was determined and how any exclusions or rollover provisions were applied.
Practical Impact on Different Estates
While the increase in the CGT exclusion is a welcome development, its overall impact varies depending on the size of the estate. For estates that fall within the estate duty net, the benefit of the reduced CGT liability is partially offset by the corresponding reduction in the estate duty deduction.
Estates that fall below the estate duty threshold benefit more directly, as the reduction in CGT is not accompanied by an offsetting estate duty consequence.
Conclusion: A Holistic Approach to Estate Tax
For executors, estate planners, financial advisers and tax practitioners, the amendment reinforces the importance of evaluating CGT and estate duty together. Although the increased exclusion provides modest relief, it does not fundamentally change the tax position of most high-net-worth estates.
Effective estate planning, careful management of assets with significant unrealised capital gains, and proactive liquidity planning remain the primary tools in managing the overall tax burden of a deceased estate.
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