Do you pay tax when you sell your car in South Africa?

No, selling your private car in South Africa normally triggers no tax. A private motor vehicle is a personal-use asset under paragraph 53 of the Eighth Schedule, so any capital gain or loss on its disposal is disregarded for capital gains tax (CGT). Most cars sell for less than they cost, so there is usually a loss, and that loss is disregarded too.

Why your everyday car is tax-free to sell

The Eighth Schedule treats a private motor vehicle as a personal-use asset. Gains and losses on personal-use assets stay out of the CGT calculation.

The rule cuts both ways:

• Sell your car for more than you paid and the gain is disregarded, so there is no CGT.
• Sell it for less, which is what usually happens, and the loss is disregarded, so you cannot set it against other gains.

For most owners a car only loses value. You buy it, drive it for a few years, and sell it later for less than you paid. Because the loss is disregarded, that shortfall cannot reduce a capital gain on anything else you own.

When a car is not a personal-use asset

The personal-use rule covers assets used mainly for private purposes. Some assets are pushed outside that definition and into the CGT net. They include:

• an asset used mainly for trade or business
• a boat exceeding 10 metres
• an aircraft with an empty mass over 450 kg
• certain gold or platinum coins
• a fiduciary or usufructuary interest

Two situations take a car out of the personal-use category.

A car used mainly for business. If the vehicle is used mainly in a trade rather than for private travel, it is not a personal-use asset, and a gain on disposal can be subject to CGT.

A car held as an investment or collectable. A classic or collector car that you hold to sell later at a profit is not a personal-use asset either. If it grows in value and you sell at a gain, that gain can attract CGT.

One more case sits apart. A car held as trading stock by a motor dealer is not a capital asset at all. When a dealer sells stock, the profit is ordinary income, not a capital gain, and it is taxed under the normal income tax rules.

Worked example: private car versus collector car

Your private car. You buy a car for R350,000 and sell it three years later for R150,000.

• Proceeds: R150,000
• Base cost: R350,000
• Result: R150,000 − R350,000 = R200,000 loss

As a personal-use asset, that R200,000 loss is disregarded. There is no CGT to pay, and nothing to claim.

A classic car held as an investment. Now take a classic car you hold as an investment, which is not a personal-use asset. You buy it for R300,000 and sell it for R500,000.

1. Capital gain: R500,000 − R300,000 = R200,000
2. Less the annual exclusion of R40,000: R200,000 − R40,000 = R160,000
3. Apply the 40% inclusion rate: R160,000 × 40% = R64,000

So R64,000 is added to your taxable income for the year. At a marginal rate of 31%, the tax on that amount is R64,000 × 31% = R19,840.

The annual exclusion of R40,000 applies once per year across all your capital gains, not once per asset. A second sale in the same year would not get a fresh R40,000.

Where to go next

For assets that do attract tax when you dispose of them, read our guide to tax on selling property or shares in South Africa. To estimate CGT on a business or investment vehicle, use the capital gains tax calculator.

You may also find these useful: capital gains tax on your house in South Africa and tax on cryptocurrency in South Africa.

SARS sources:

• https://www.sars.gov.za/tax-rates/income-tax/rates-of-tax-for-individuals/
• https://www.sars.gov.za/tax-rates/income-tax/capital-gains-tax-cgt/