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Capital Gains Tax at Death

Understanding the Deemed Disposal Rule in South Africa (2026 Guide)
29 June 2026 by
XRA


When a person dies in South Africa, one of the first things that happens — long before the will is read, long before assets change hands — is an invisible tax event. The law treats death as a disposal of everything the deceased owned. No actual sale takes place. No money changes hands. But under SARS and the Income Tax Act, it is as though the deceased sold every qualifying asset at market value on the day they died.

This is the deemed disposal rule, and it has real, often significant financial consequences for the estate and its beneficiaries. Getting it wrong — or not accounting for it at all — is one of the most common and costly mistakes in deceased estate administration.

This guide explains how CGT at death works in South Africa, what relief is available, how the rules changed in 2026, and what executors and estate planners need to know to navigate it correctly.

What Is the Deemed Disposal Rule?


Under Section 9HA of the Income Tax Act 58 of 1962, a person is deemed to have disposed of all their assets at market value at the date of death. This applies to all qualifying capital assets — investment properties, shares, unit trusts, business interests, and any other assets subject to CGT — regardless of whether they are actually sold.

The deemed disposal rule creates a capital gains tax event in the deceased's final income tax return. The capital gain is calculated as the difference between the market value of the asset on the date of death and its base cost (what the deceased originally paid for it, plus allowable improvements and acquisition costs).

This is not a minor technicality. For someone who bought a Cape Town investment property twenty years ago, or who accumulated a share portfolio over decades, the capital gain at date of death can run into the millions — and the resulting CGT liability comes directly out of the estate before a single cent is distributed to heirs.

Why Does This Rule Exist?


Before the deemed disposal rule, untaxed capital gains could pass between generations without ever being subject to tax — the asset would be inherited at a low base cost, appreciate further, and the heirs could eventually sell without the historic gain ever being captured. Section 9HA closes that loop. It ensures that accumulated, unrealised capital gains are brought into the tax net at the point of death, with the estate bearing that liability before distribution.

The Legal Framework: Section 9HA and the Eighth Schedule


The technical foundation of CGT at death sits in two places:

Section 9HA governs the deemed disposal by the deceased person — the tax obligation that arises in the period up to the date of death and is declared in the final ITR12 return.

Section 25 governs what happens to assets in the hands of the deceased estate after death — how assets are acquired by the estate, how they are distributed to heirs and legatees, and the special rules for transfers to a surviving spouse.

Paragraph 40 of the Eighth Schedule provides additional clarity, confirming that for CGT purposes, the disposal of an asset by the deceased estate is treated as if it were disposed of by the deceased themselves. This matters because it means the estate inherits the deceased's CGT history for assets it later sells.

Together, these provisions create a framework where:

  • The deceased has a final year of assessment ending on the date of death.
  • All qualifying assets are deemed disposed of at market value on that date.
  • The resulting capital gain or loss is declared in the final ITR12 return.
  • The executor, acting as the deceased's representative taxpayer, is responsible for this filing.

How CGT at Death Is Calculated


The calculation follows the standard CGT mechanics, with one key difference in the exclusion amount.

Step 1: Determine the Base Cost

The base cost is what the deceased originally paid for the asset, including allowable costs such as transfer duty, agent commissions at acquisition, and the cost of capital improvements. Costs that are specifically excluded include repairs, maintenance, insurance, and bond interest (with limited exceptions for listed shares).

For assets acquired before 1 October 2001 (the CGT valuation date), the base cost is determined using one of the SARS-approved valuation methods: the time-apportionment method, the 20% of proceeds method, or the market value on valuation date.

Step 2: Determine the Proceeds

On a deemed disposal, the proceeds are the market value of the asset on the date of death. This requires a professional valuation — not an estimate. For listed shares, the market value is the closing share price on the date of death. For investment properties, a formal property valuation is typically required. For unlisted shares and business interests, a detailed valuation by a qualified professional is essential.

Getting these valuations right matters enormously. They feed into both the CGT calculation and the estate duty return, and SARS has the authority to challenge valuations it considers not to be bona fide.

Step 3: Calculate the Capital Gain

Capital gain = Market value at date of death − Base cost

Step 4: Apply Exclusions

In the year of death, the standard annual CGT exclusion of R50 000 is replaced by an enhanced exclusion of R440 000 (for deaths occurring on or after 1 March 2026, following the Budget 2026 announcement — increased from R300 000 previously). This is applied against the net capital gain before the inclusion rate is applied.

Additionally, the primary residence exclusion of R3 million may apply where the deceased owned a qualifying primary residence.

Step 5: Apply the Inclusion Rate

For individuals, only 40% of the net capital gain (after exclusions) is included in taxable income. That included amount is then taxed at the deceased's marginal income tax rate. The maximum effective CGT rate for individuals is 18% (40% inclusion × 45% top marginal rate).

The Spousal Rollover: When CGT Does Not Apply at Death


The most significant relief mechanism in this entire area of law is the spousal CGT rollover under Section 9HA(2) and Section 25(4) of the Income Tax Act.

Where a capital asset is bequeathed to a resident surviving spouse, the deemed disposal at death falls away. No CGT is triggered on those assets in the deceased's final return. Instead, the surviving spouse steps into the shoes of the deceased — inheriting the original base cost and the full acquisition history of the asset.

This is not a tax exemption. It is a deferral. The CGT liability that would have arisen at the first spouse's death is postponed until the surviving spouse eventually disposes of the asset (or dies). At that point, the CGT is calculated on the full gain from the original base cost — not from the market value at inheritance.

Why This Matters for Estate Planning


The spousal rollover is one of the most powerful estate planning tools in South African tax law, and its interaction with the surviving spouse's estate duty rollover (the Section 4A abatement portability) makes it doubly significant for married couples with assets.

But it comes with conditions that are often misunderstood:

The rollover only applies to a resident surviving spouse. A non-resident spouse does not qualify. If the deceased's spouse is not ordinarily resident in South Africa for tax purposes, the deemed disposal at market value applies in full.

The rollover does not apply if the asset is sold by the estate. If the executor sells the asset during the administration of the estate — rather than transferring it in specie to the surviving spouse — both the deemed disposal at date of death and the actual disposal by the estate must be accounted for. The executor would need to calculate and declare both CGT events. This is a trap that catches many estates when property is sold to pay debts, taxes, or executor's fees.

Base cost record-keeping is the executor's responsibility. When the rollover applies, and the surviving spouse inherits assets at the deceased's original base cost, someone needs to keep that base cost information — it becomes the starting point for the surviving spouse's own CGT calculation when they eventually dispose of the asset. Executors should ensure that base cost schedules are prepared and retained as part of the estate records.

Two CGT Events in One Estate: A Complication Executors Must Understand


One of the less intuitive aspects of CGT at death is that a single asset can trigger two separate CGT calculations — and both land on the executor's desk.

CGT Event 1: The deemed disposal at date of death (Section 9HA)

This arises in the deceased's final ITR12 return, declared up to the date of death. The gain or loss is measured against the original base cost.

CGT Event 2: The actual disposal by the estate (Section 25 / Paragraph 40)

If the executor subsequently sells the asset, a second CGT event arises in the deceased estate's tax return for the year in which the sale occurs. The gain here is measured between the market value at date of death (which becomes the estate's base cost for that asset) and the actual proceeds realised.

A worked example:  Zanele dies holding listed shares. At date of death, her base cost is R20 000 and the market value is R100 000. The executor later sells the shares for R130 000.

  • Deemed disposal (in Zanele's final return): Gain of R80 000 (R100 000 − R20 000). CGT payable by the estate from this assessment.
  • Actual disposal by the estate: Gain of R30 000 (R130 000 − R100 000). CGT payable by the estate in the year of sale.

Both liabilities sit on the estate. Both must be calculated, declared, and paid before the estate can be finalised and the Deceased Estate Compliance (DEC) letter obtained from SARS.

This structure — two CGT events on a single asset — is one of the primary reasons why executors of estates holding investment property, share portfolios, or business interests should work with a qualified tax practitioner from the outset.

What Assets Are Subject to CGT at Death?


Most capital assets are subject to CGT at death, but several categories are specifically excluded or treated differently.

Subject to CGT (deemed disposal applies):

  • Investment properties (second properties, buy-to-let portfolios)
  • Listed shares and unit trusts
  • Unlisted shares and business interests
  • Equity in close corporations
  • Cryptocurrency held as a capital asset
  • Collectables (art, jewellery, wine) above the personal use asset threshold

Excluded from CGT at death or specifically treated differently:

  • Primary residence

A qualifying primary residence may benefit from the primary residence exclusion, allowing up to R3 million of the capital gain to be disregarded (subject to the requirements of the Eighth Schedule). Where the capital gain exceeds the exclusion, only the balance is taken into account for CGT purposes.


  • Personal-use assets

Many assets used mainly for personal enjoyment are excluded from CGT. These typically include household furniture, clothing, personal effects and private motor vehicles used for domestic purposes. However, certain assets—such as artwork, jewellery, coins and other collectables—may not qualify for the personal-use asset exemption and should be considered separately.


  • Retirement fund benefits

Benefits paid from approved pension, provident, preservation and retirement annuity funds are not subject to CGT. These benefits are taxed under the retirement fund tax rules rather than the capital gains tax regime.


  • Tax-Free Investment (TFI) accounts

Investments held in approved Tax-Free Investment (Section 12T) accounts remain exempt from both normal tax and CGT, including on death.


  • Trading stock

Assets held as trading stock are not subject to the deemed disposal rules applicable to capital assets. Instead, they are dealt with under the normal income tax provisions. For example, livestock and produce forming part of a farming business are generally treated as trading stock, with any tax consequences determined under the Income Tax Act rather than the CGT provisions.


  • Assets transferred to a surviving spouse

Where qualifying assets are bequeathed to a resident surviving spouse, the spousal rollover relief applies. The deemed disposal is deferred, and the surviving spouse acquires the asset at the deceased's original base cost. Any capital gain is therefore postponed until the spouse later disposes of the asset or dies.

The Executor's CGT Obligations: A Practical Compliance Checklist

The executor is the representative taxpayer for both the deceased and the deceased estate. Their CGT obligations are substantive and sequenced.

For the Deceased's Final Return (Pre-Death):

  • Obtain valuations for all capital assets as at the date of death
  • Establish the base cost for each asset (including improvements, acquisition costs, and pre-valuation-date adjustments where applicable)
  • Calculate the deemed capital gain or loss for each asset
  • Apply the R440 000 year-of-death exclusion (for deaths on or after 1 March 2026)
  • Apply the primary residence exclusion where applicable
  • Apply spousal rollover where assets are bequeathed to a resident surviving spouse
  • Declare all CGT information in the ITR12 return, even where the exclusion eliminates the tax liability — disclosure is still required
  • Deduct the resulting income tax liability (including CGT) as a debt in the estate duty calculation

For the Deceased Estate's Ongoing Returns (Post-Death):

  • Register the deceased estate with SARS via eFiling where required.
  • Declare capital gains arising from actual asset sales by the estate in the relevant year's ITR12
  • Apply the annual exclusion of R50 000 available to the estate where assets are disposed of to third parties (not to heirs/legatees)
  • Track the estate's tax position until the Liquidation and Distribution account is finalised

Key Document Requirements:

  • Death certificate and Letter of Executorship
  • Formal property valuations at the date of death
  • Share portfolio valuations (IT3 certificates where applicable)
  • Base cost records and purchase documents for all assets
  • Proof of acquisition costs and capital improvements

CGT and Estate Duty: The Full Tax Picture


No discussion of CGT at death is complete without addressing estate duty. These two taxes do not operate in silos — they interact in ways that affect the overall tax burden on the estate.

Estate duty is levied at 20% on the first R30 million of the dutiable estate and 25% on the dutiable value above R30 million, with a primary abatement of R3.5 million per person (rising to R7 million for a surviving spouse through the Section 4A portability provision).

The CGT liability arising from the deemed disposal is deductible as a Section 4 debt of the estate when calculating the net value for estate duty purposes. This means:

CGT is calculated and paid first (from the estate's final income tax assessment).
That CGT liability reduces the net value of the estate.
Estate duty is then calculated on the reduced net value.


This sequencing matters. A substantial CGT liability on a large property portfolio or business interest can meaningfully reduce the estate duty exposure. Estate planning that considers only one of these taxes at a time — CGT without estate duty, or estate duty without CGT — is incomplete.

For high-net-worth estates where multiple properties or large share portfolios are involved, the interaction between CGT, income tax, and estate duty must be modelled holistically. This is not a DIY exercise.

The Bottom Line


CGT at death is not a niche tax issue reserved for the ultra-wealthy. Anyone who has owned an investment property for a decade, accumulated a share portfolio, or built a business has likely accrued capital gains that will crystallise at the moment of their death — without any sale taking place, without any cash changing hands.

The deemed disposal rule under Section 9HA of the Income Tax Act is one of the most consequential provisions in South African tax law for individuals and their families. Understanding it — the calculation mechanics, the spousal rollover, the year-of-death exclusion, the two-event CGT structure in an estate where assets are sold, and the interaction with estate duty — is not optional knowledge for anyone involved in deceased estate administration.

For executors, this is a compliance obligation that sits at the heart of the estate administration process. For families, it is a reason to review estate plans regularly and ensure that the structuring of assets, ownership, and beneficiary nominations is aligned with the current tax landscape.

Getting this right protects the value of what the deceased worked a lifetime to build.

This article is current as at June 2026 and reflects the CGT provisions effective for the 2026/27 year of assessment, including changes introduced by Budget 2026. Tax legislation changes regularly. Always consult a qualified tax practitioner or registered tax advisor for advice specific to your estate.

References: Income Tax Act 58 of 1962 (Section 9HA, Section 25, Eighth Schedule); Estate Duty Act 45 of 1955; SARS Comprehensive Guide to Capital Gains Tax; SARS FAQs on Deceased Estates (LAPD-IT-G31); SARS Budget 2026 FAQs; SARS IT-GEN-06-G01 Guide to the ITR12 Return for Deceased and Insolvent Estates.

No. Capital Gains Tax (CGT) is only triggered if the deceased owned assets that have increased in value and are subject to the deemed disposal rules under Section 9HA of the Income Tax Act. In many estates, relief measures such as the year-of-death annual exclusion, the primary residence exclusion, or the spousal rollover may reduce or eliminate the CGT liability.

The deemed disposal rule treats a person as having disposed of most of their capital assets at their market value immediately before death, even though no actual sale takes place. Any resulting capital gain or capital loss must be calculated and reported in the deceased's final income tax return.

It depends. If the asset is inherited by a beneficiary other than a qualifying surviving spouse, the estate generally acquires the asset at its market value on the date of death for future CGT purposes. Where the spousal rollover relief applies, the surviving spouse inherits the deceased's original base cost, and the capital gain is deferred until the asset is eventually sold or the spouse dies.

Not necessarily. A property may be subject to CGT because of the deemed disposal at death and may also form part of the estate for estate duty purposes. However, these are separate taxes with different purposes. Importantly, any income tax liability arising from the deemed capital gain is generally deductible when calculating the dutiable value of the estate, reducing the amount on which estate duty is calculated.

In many cases, no. Where a qualifying capital asset is bequeathed directly to a resident surviving spouse, the spousal rollover provisions generally defer the CGT liability. The surviving spouse assumes the deceased's original base cost, and the tax is usually only triggered when the asset is later disposed of or on the spouse's death.

If the executor sells an asset before it is transferred to a beneficiary, the estate may have to account for a second CGT event. The first arises from the deemed disposal on death, while the second is based on any increase (or decrease) in value between the date of death and the date the asset is sold.

No. Benefits paid from approved pension, provident, preservation and retirement annuity funds are not subject to CGT. These benefits are governed by separate tax rules and generally fall outside the deceased estate for CGT purposes.

XRA 29 June 2026
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