okie dokie - it starts making a little more sense. i am guessing that sugar snap either did NOT get a tax break on the trading losses or made profits against the same revenue source code from somewhere which were then allowed as deductions. if its ringfenced, my understanding would be that losses will only be deductible against same type profits. if this sounds strange, imagine that you can have losses on some share dealings and profits on others; the losses from share dealings can then be netted against profits from share dealings, but you cannot deduct the trading loss of investment activities from your PAYE paid over to SARS iro salaried earnings. kipper, you can claim a capital loss, but its also ringfenced, in this case its ringfenced within the "capital sphere", ie you can claim capital losses against any CAPITAL gain you may have, but not against a trading (revenue) gain. you can also carry a capital loss forward to the next year and use it then. the formula is : 1) determine capital gain/loss on EACH capital transaction 2) add up all capital gains/losses 3) deduct your annual exclusion (is it still 15K ?) 4) deduct any assessed loss carried forward 5) = NET capital gain/loss IF IT IS A GAIN, THEN : 6) apply the inclusion rate of 25% (for individuals) 7) pay tax at your marginal rate IF IT IS A LOSS, THEN : 8) carry item "5" forward to the next year all of the above assumes that the share transactions are of a CAPITAL nature, ie you have held the shares for longer than 3 years or can motivate to SARS as to why you do not consider the gain/loss to be capital. (thats a whole other kettle of fish) there is NO double taxation, ie you will never pay capital AND normal tax, its either or. moosedawg, you are right... provided the profit and loss is in the same year, both transactions are as a result of the same activity and both are revenue in nature. (ie not capital) CAVEAT : i am pretty sure i am right, but this is not my area of absolute expertise, pls be guided accordingly.
Straight out of the book olilau. Exactly what the CA told me! Ringfencing is like a doctor with a gamelodge, he cant claim if the gamelodge is making a loss and in the meantime cashing in from his practice. He has to ringfence the gamelodge and treat the profit/loss from the lodge on its own individual merit keeping the lodge taxation seperate from his practice taxation...err something like that
Hi Olilau. Thanks for the input. I see on the first page of the e-filing tax form that there's a selection for business trade or professional income. I've got that un-selected. I'm going to select it and re-do my form and see what happens.
Olilau & Moosedawg, why do SARS give us a choice on the IT12 to ring-fence or not ? If you cannot offset your losses against other income, what about the 3 out of 5 year rule or 6 out of 10 year rule? When does this apply? As I told you, I included on my IT12 that I am a futures trader on SAFEX and that this was my first year that I traded (they do receive Std Banks Profit & Loss accounts) and made a loss, surely they would have stopped it here already and not paid out my loss.
Olilau, like I said, I had 3 types of income, (1) Salary from cc, (2) consulting fees from private trade (3) trading loss from futures, all with different codes, ie 1 salary, 2 profit & 3 loss. I asked for my loss not to be ring-fenced and stated clearly that this is for futures trading. SARS allowed this loss because of 4 reasons, ie (1) did not look at the description of futures trader or (2) allowed it because I asked not to ring-fence and it was my first year loss or (3) I am not earning taxable income in excess of the top annual margin or (4) they don't see this trade as a suspect trade. Hi Tad : Ring-fencing will apply if you earn taxable income in excess of the top annual margin (40% on R490 001) or if SARS sees the trade as suspect. If you ask to be ring-fenced then your loss will be carried forward. If this still does not make sense, just ask. I will try and explain then in more detail.
Hi Olilau, Sugar Snap. Well, I selected the business and trade box, and a whole new section came to life including the optional taxable loss code box. It also gives you a section to calculate your costs to add to your loss. Cool. Next year end will be a signicant loss amount unless I can trade into profit. Things looking greener today.