HOME owners have been surprisingly lax about getting their homes valued for capital gains purposes, says Bill Rawson, president of the Institute of Estate Agents.

Nevertheless, he warns, it is important that it is done because after September 30, it will no longer be possible to use this convenient method of base-cost determination of a property's value.

Capital Gains Tax (CGT) is payable on the proceeds of the sale of property, provided that the property is not the taxpayer's primary residence, in other words, where he lives, and he owns it in his own name or in the name of a special trust. If his capital gain on his primary residence is more than R1 million, or the property is larger than 2ha, he will pay CGT on the excess.

The South African Revenue Services, says Rawson, has not yet specified exactly who should do the valuation, but it seems that an estate agent with a knowledge of the market is acceptable to the body. However, even if a professional is used, Sars reserves the right to audit and amend the valuation by its own criteria, leaving it up to the asset owner (taxpayer) to appeal against its decision if he or she so wishes.

Owners thinking of reducing their capital gains by bumping up their valuations, or getting inflated valuations, warns Rawson, should note that Sars has inserted loss limitation clauses into the rulings which will make "phantom losses" impossible. Some people, Rawson says, feel that a valuation is unnecessary because their homes have low value.

"They think they will not have to pay CGT when they sell, because their capital gain will be less than R1 million."

However, they will still have to provide figures on their tax return to show that they qualify for the exemption. The alternatives to a valuation are to use the time-based, apportionment method, or a formula which deems the base cost of the property to have been 20% of the proceeds.

As CGT is calculated on the period of ownership between October 1, 2001, and the date of sale, using this formula could prove "very expensive" if that period is less than 80% of the full period of ownership. "It will pay owners to have the valuation done as soon as possible in all circumstances," says Rawson.

"Even if they then decide to ignore the valuation for Capital Gains Tax purposes, they should definitely leave this option open to themselves." For further information, contact Bill Rawson on 021 657 3500.