As conversations around intergenerational wealth grow, many South Africans may be unsure how to best handle an inherited property - whether to sell, rent it out, or hold it for the long term.
According to Adrian Goslett, CEO and Regional Director of REMAX Southern Africa, inheritance properties can be a powerful vehicle for wealth creation - but only if heirs fully understand the financial and legal responsibilities. “An inheritance property can be a helpful step towards long-term wealth creation, when the correct financial and legal avenues are followed,” says Goslett.
He notes that inheriting a property doesn’t come without costs: heirs often take on debt, as well as ongoing obligations like maintenance, insurance, rates, and taxes.
“Inherited properties may require maintenance or modernisation that can be quite costly,” says Goslett. “That is why we recommend doing a professional inspection to map out expenses and determine whether the property will provide positive returns on investment.”
Understanding Capital Gains Tax (CGT): What heirs must know
One of the most important financial factors when inheriting property is Capital Gains Tax (CGT). According Tarryn Gravenor, attorney and conveyancer at Herold Gie Attorneys, when you dispose of property, CGT is calculated based on the difference between what you sell it for and its “base cost.”
- Base cost typically includes: the original purchase price, any costs to improve the property (renovations, additions), as well as associated transaction costs (legal fees, estate agent commissions, transfer costs).
- The capital gain = sale proceeds minus base cost.
Key exemptions to be aware of
- Primary residence exemption: If the inherited property is or becomes your primary home, a portion of the capital gain (up to R2 million) may be exempt.
- Annual exclusion: You’re entitled to exclude the first R40,000 of your net capital gain each tax year (or up to R300,000 in the tax year of death).
How much tax is actually payable
- Only 40% of the net capital gain is included in your taxable income.
- The effective tax rate (based on your income tax bracket) can go up to about 18% for individuals.
- Companies and trusts have different effective rates (e.g., ~21,6% for companies; ~36% for many trusts).
When CGT applies
CGT is triggered not just on a sale - other “disposal” events count too: donation, death, emigration, and so on.
Why good record-keeping matters
To minimise CGT, you need detailed, accurate records:
- Original purchase price
- Costs of improvements (renovations, additions)
- Legal and agent fees, and other transaction costs
- These allow you to correctly establish the base cost, lowering your taxable gain.
Making the right decision: Sell, rent, or hold
Combining Goslett’s real-estate insight with the CGT tax strategy:
1. Inspect and assess costs
Before deciding what to do, have the property professionally inspected. Factor in likely maintenance or renovation costs - these may justify holding or selling.
2. Run a CGT scenario
With a conveyancer or tax professional: estimate your capital gain, apply the base-cost calculation, and model CGT liabilities under different scenarios (sell now vs hold long-term).
3. Compare rental income vs sale proceeds
If you rent out, ensure projected rental income outweighs ongoing costs (rates, insurance, maintenance) and potential CGT if you eventually sell.
4. Leverage exemptions where possible
If it’s your primary home, check whether the R2 million exemption helps. Also consider the annual R40,000 (or R300,000 in year of death) exclusion.
5. Get expert advice
Work with a real estate professional, tax advisor, or attorney - they can provide local market insight, CGT forecasts, and a tailored strategy.
"Inherited properties hold both emotional and financial value. But understanding CGT implications, costs of upkeep, and your options is key to making it a meaningful, wealth-building asset - rather than a liability. By combining Goslett’s pragmatic advice with the robust CGT framework outlined in Property24, heirs can make informed decisions that protect not just their legacy, but their future."
