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TAX621S- TAXATION 202- 1ST OPP- NOV 2023 |
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n Am I BI A u n IVER s ITV
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 0?BOAC
LEVEL: 6
COURSE: TAXATION 202
COURSE CODE: TAX621S
DATE: NOVEMBER2023
SESSION: THEORY AND CALCULATIONS
DURATION: 3 HOURS
MARKS: 100
FIRST OPPORTUNITY EXAMINATION PAPER
EXAMINER(S): Mr. G Jansen, Ms. M Amakali and Mr. Y Elago
MODERATOR:
Mrs. Y van Wyk
THIS PAPER CONSISTS OF 10 PAGES
(Excluding this front page)
INSTRUCTIONS
1. Answer ALL the questions and in blue or black ink.
2. Write neat and clearly.
3. The names of people and businesses used throughout this test paper do not
reflect the reality and may be purely coincidental.
4. Show all workings where applicable.
5. Round off all amounts to the nearest RAND where applicable.
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QUESTION 1
(60 MARKS)
Multiple Choice Questions.
Write down the number of the question with your correct answer on your answer sheet,
e.g 1. C. Each question carries 2 marks.
1. Which one of the following is true in the case of a person resigning from employment?
A. The lump sum is taxed according to a separate tax table; the first R500 000 is not taxed.
8. A maximum of R5 000 will be exempted from tax in respect of a lump sum paid out by a
provident fund.
C. Any amount received from the employer on resignation will be exempt from tax as long
as the taxpayer is over 65 years of age.
D. The lump sum is taxed according to a separate tax table.
2. Carl Marx purchased an annuity when he was 45 years old. He paid R500 000 (out of an inheritance)
for the annuity. He will receive R7 605 per month for the next 10 years. If he received the annuity from
1 June 2022, how much will be included in his income for the 2023 year of assessment, in respect of
this purchased annuity?
A. Rnil to be taxable as the annuity was purchased with money that was inherited.
8. R7 605 x 12 months
C. R7 605 x 9 months x 55%
D. R7 605 x 9 months x 45%
3. Which of the following is regarded as a capital receipt
A. Loss of profits on insurance claim.
8. Proceeds from the sale of shares held as an investment.
C. Compensation received for damages to an office block owned by a property investor.
D. 8 and C above.
E. None of the above.
4. Mrs Minute has received free accommodation from her employer since the 1st August 2022. The
accommodation consists of four furnished rooms. She pays for the power. Her previous year's
remuneration proxy was R164 461, and the current year's is R180 000. Assuming that all the other
requirements of this fringe benefit are met, the value of the fringe benefit for the 2023 year of
assessment is:
A. R8 872
8. R11167
C. R9 915
D. R7 687
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5. Which one of the following statements is incorrect?
A. Only 80% of a travel allowance must be taken into account for purposes of calculating
employees' tax.
B. Vehicles are depreciated over a period of seven years for travel allowance purposes.
C. When calculating wear and tear for travel allowance purposes, the value of the vehicle is
limited to R560 000.
D. The determined value of a vehicle (using the tables when calculating expenses to be set off
against a travel allowance) excludes VAT.
6. Which of the following principle(s) was dealt with in the court case 'CIR v Visser (8 SATC 271)'?
A. Received by.
B. Total amount.
C. B and C above.
D. Capital / Revenue nature.
7. Which of the following receipts or inclusions will form part of special inclusions?
A. Annuities.
B. Recoupments.
C. Dividends.
D. All of the above
8. Which of the following is not a tax imposed by the Income Tax Act 58 of 1962:
A. Dividends tax.
B. Donations tax.
C. Turnover tax.
D. Stamp duties tax.
9. Frans is 26 years old. His taxable income for the 2023 year of assessment was R250 000. What is his
normal tax liability for the 2023 tax year ignoring any rebates?
A. R45 000.
B. R40 680.
C. R6 240.
D. R46 920.
10. Mr van der Walt purchased an annuity of R500 per month for himself for he paid R25 000. The annuity
will be paid from 1 August 2022 for 15 years. What is his taxable income in respect of the purchased
annuity for his 2023 year of assessment?
A. R833.
B. R139.
C. R361.
D. R2 167.
11. Which of the following court cases dealt with the principle of Total amount in cash or otherwise?
A. People's stores.
B. Butcher Brothers.
C. Brummeria.
D. B and C above.
E. A and C above.
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12. Mrs Maddie, aged 56 resigned from her employment on 28 February 2023. She received a monthly
salary of R23 000 for the 2023 tax year. In addition she received a restraint of trade payment of R250
000 on her last working day, dividends from an investment amounting to R12 000 and alimony from
her ex-husband of R24 000 for the year. Calculate her income for the 2023 year of assessment?
A. R544 000.
B. R526 000.
C. R562 000.
D. R550 000.
13. Which of the following statements are true?
A. A taxpayer who sells groceries exchanges them with a second taxpayer who sells clothes does
not have to recognize any amount in gross income.
B. Your father offers to loan you money at 6% interest to help you fund your studies. He could
have earned interest of 8% at the bank. He will only have to include 6% interest in his gross
income.
C. Soft drinks are sold in glass bottles for R10. If the customer returns the bottle, he/she receives
a R 1 refund. The seller must include R9 in its gross income when the sale is made.
D. A clothing store offers that 6months interest-free accounts should not include an amount in
gross income until after the expiry of the 6month period.
14. Which of the following principle(s) was dealt with in the court case 'Witwatersrand Association of racing
clubs'?
A. Received by.
B. Accrued to.
C. Total amount.
D. Capital/ Revenue nature.
E. None of the above.
15. Which of the following will be exempt from normal income tax?
A. Lump sum.
B. Disability pension.
C. Lease premiums.
D. Sale of a capital asset.
16. Which of the following is regarded as a revenue receipt?
A. Goodwill
B. Horse race winnings.
C. Payment received for the restriction of use of capital asset.
D. Damages for personal defamation.
17. Which court case dealt with the principle of change in intention?
A. Pyott Ltd
B. Stott.
C. Natal Estates Ltd.
D. Lever Brothers.
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18. Roy, 65 years old received R340 000 for the 2023 year of assessment. Calculate his tax payable after
any rebates?
A. R66 646.
B. R28 470.
C. R44 895.
D. R53 895.
19. Mr Garry, retired at the age of 65 years on 28 February 2023. He received R840 000 as well as a lump
sum in respect of his retirement of R1 000 000 for the 2023 year of assessment. Calculate his tax
payable for the 2023 year of assessment. Ignore any rebates.
A. R685 041.
B. R630 006.
C. None of the above.
D. All of the above.
20. Which of the following statements is not true?
A. All of.the requirements of the gross income definition must be met before an amount can form
part of,gross income
B. A non-resident who has spent a certain number of days in SA (physical presence test).
C. Normal tax is imposed on "residents" on their worldwide income, while non-residents are only
taxed in SA on their SA sourced/deemed SA source income.
D. All fringe benefits are taxable.
E. Consideration paid by the employee should be deducted from the value of the fringe benefit
received.
21. In the Geldenhuys case, it was held that:
A. The amount is only included in gross income by a taxpayer only if it is received by him on his
own behalf, for his own benefit.
B. Subsequent disposal of income is irrelevant
C. Accrued to = unconditionally entitled to the amount.
D. The onus is on SARS to determine the amount
22. "Gross income" definition par(c) - Service rendered excludes:
A. Fringe benefits
B. Salaries.
C. 13th cheque bonus.
D. Tips received by waiters.
23. Which of the following is true?
A. South African source interest received by non-resident individual is exempt unless a natural
person and they were physically present in South Africa >183 days.
B. Holiday accommodation provided by the employer to his employee is not a taxable fringe
benefit.
C. The full cash equivalent of the right of use of motor vehicle is included in "remuneration".
D. All of the above.
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24. Wolf is 32 years old and he is a resident of the Republic of South Africa. He received
foreign dividends from a foreign investment amounting to R 15 300. Calculate Wolf's
income. Round off to the nearest Rand (where possible).
A. R6 800
B. R15 300
C. R8 500
D. R10 929
25. Runy was away for work purposes for 3 days. Her employer (PwK) paid for her
accommodation and gave her an allowance of R300 per day. She kept all her receipts for
expenditure incurred to the value of R520. The deemed amount for meals and incidental
cost is R435 per pay. Calculate Runy's taxable income?
A. R380
B. R900
C. RO
D. R435
26. Ronald is a cashier at Shoprite. In December 2022, Shoprite took Christmas hampers
from their stock and gave to all employees free of charge for the festive season holidays.
Each Christmas hampers cost Shoprite R586 (excluding VAT). The market value
excluding VAT amounts to R780. What is the taxable value of the fringe benefit to Ronald?
A. R586
B. RO (no value)
C. R780
D. None of the above
27. On 30 June 2022, Pukkie (Pty) Ltd waived a debt of R2 459 owing by Samatha, a cleaner.
Samatha resigned from Pukkie (Pty) Ltd on 31 May 2022 to start her new role as a
receptionist at KK Attorneys. During her employment with Pukkie (Pty) Ltd, she used to
settle her debt in monthly installments of R200. Calculate the taxable benefit for Samatha
relating to the debt waiver for the 2023 year of assessment.
A. RO
B. R2 459
C. R1 659
D. None of the above
28. Gift is a Personal banker at ASSA. On 1 April 2022, received an interest free loan from
her employer amounting to R2 000. The official rate on 1 April 2022 and at 28 February
2022 is 7%. What is the cash equivalent of the interest free loan that is taxable in the
hands of Gift?
A. RO
B. R2 000
C. R140
D. None of the above
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29. On 1 September 2022, Oprah received a low interest loan from her employer to enable
her to pay her UNISA tuition fees. The loan amounted to R30 000 with 3% interest. The
official rate is 7%. Calculate Oprah's taxable income.
A. RO
B. R30 000
C. R1 200
D. R600
30. Which of the following options will constitute gross income?
A. Daily income of a restaurant
B. Inheritance from a deceased estate
C. Sale of shares held as an investment
D. Option Band C
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QUESTION 2
(40 MARKS)
James Dearham is 32 years old, married (out of community of property) and employed by Trolleys
Ltd in Bloemfontein. The company manufactures shopping trolleys.
James has been employed by Trolley's Ltd for the past ten years and he earns a salary of
R17 400 per month. Ignore Capital Gains Tax (CGT).
OTHER RECEIPTS:
Dividends received:
James received the following dividends during the 2023 year of assessment:
Dividend from South African public company (gross amount)
Dividend from South African private company (gross amount)
Dividend from United Kingdom public company (taxable portion)
Dividends from South American public company (taxable portion)
R2 000
R1 800
R2 400
R1 700
Interest received:
James received the following interest during the 2023 year of assessment:
Interest on fixed deposit at a registered bank in South Africa (not a tax-free investment) R13 100.
Sale of stamp collection:
James sold his stamp collection, which he bought in 2005 for R1 300, for R26 000.
Cash Prize:
James was a contestant on the 'Who wants to be a millionaire" game show. He won R16 000.
Rent:
James owns a house in Upington, which he leases to Adele Gabis for R1 800 per month. Adele
Gabis has been renting the house for the past two years.
James incurred the following expenses during the 2023 year of assessment in respect of the
house:
Rates and taxes
RS 000
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Repairs to roof and windows damaged during a hailstorm
R2 000
Costs incurred to erect Para fencing around the house to improve the
market value
R4 000
Replacement of a faulty geyser
R4 500
Painting costs
R2 500
James also received the following fringe benefits from Trolley's Ltd during the 2023 year of
assessment:
Travel allowance:
James received a travel allowance of R4 000 per month for the whole year. His motor vehicle cost
R170 000 (excluding VAT) and he did not keep accurate records of his actual vehicle costs. He
travelled 30 000 kilometres in total during the current year of assessment and his logbook
indicates that he travelled 18 000 private kilometres. The travel allowance was not in respect of
the company car he received from his employer (see below). James paid for all of the running
costs of this vehicle.
Use of a company car:
The managing director of Trolleys Ltd, decided that James' own motor vehicle was equipped to
pick up trolleys that needed repairs, and gave him the use of a brand-new VW kombi for the whole
year. The retail market value of the motor vehicle amounted to R120 000 including a maintenance
plan. Trolleys Ltd paid for all the running costs of the vehicle. The business kilometres make 20%
of total kilometres travelled.
Low interest debt:
On 1 October 2022, James' employer granted him a loan of R12 000 to do maintenance on his
residence. James paid interest at a rate of 5% a year on the loan (you may assume that the official
interest rate remained constant at 7.75%).
Housing Benefits:
James' employer allocated the private use of a house (owned by the employer), consisting of at
least 6 rooms, to him for the whole year. The house is furnished, and James is responsible for
the water and electricity account and for maintaining the house. His remuneration proxy is R200
000.
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Holiday Accommodation:
During the April 2022, James and his wife, Sofia, spend five days at the coast in a furnished flat
that is owned by Trolleys Ltd. Trolley's usually rents the flat out at a cost of R275 per person per
day.
Pension Fund contributions:
James is a member of his employer's pension fund and contributes R1 200 per month to the fund.
The employer does not contribute towards the pension fund.
Medical Aid:
James is a member of his employer's medical aid fund. According to the rules of this fund the
employer makes a contribution of R1 550 per month for James and his wife. James is obligated
to make a contribution of R400 per month. The medical aid fund paid most of the medical
expenditure incurred by James, but he had to pay RS 345 of the total medical expenses of R58
921 in respect of qualifying medical expenses.
Donation:
On 1 January 2023, James donated R2 000 to the University of Limpopo. The University issued
a section 18A certificate.
Other information:
Trolley's limited deducted R36 925 from James as Employees taxes during the year.
REQUIRED:
Calculate James Dearham's tax liability for the 2023 year of assessment. Ignore Capital Gains
Taxes. You may also ignore the impact of the section 6A and section 68 medical credits on the
tax liability.
(40)
You are required to round off to the nearest Rand.
END OF EXAMINATION PAPER
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AN Nt. 'I. LIR.t:.
TAX RATES
Taxable income
R
0 - R 226 000
R 226 001 - R 353 100
R 353 101 - R 488 700
R 488 701 - R 641 400
R 641 401 - R 817 600
R 817 601 - R1 731 600
R1 731 601 +
Rates of tax
18% of each R1
R 40 680 + 26% of the amount over
R 73 726 + 31 % of the amount over
R115 762 + 36% of the amount over
R170 734 + 39% of the amount over
R239 452 + 41 % of the amount over
R614 192 + 45% of the amount over
R 226 000
R 353 100
R 488 700
R 641 400
R 817 600
R1 731 600
TAX RATES
Taxable income
R
0 - R 237 100
R 237 101 - R 370 500
R 370 501 - R 512 800
R 512 801 - R 673 000
R 673 001 - R 857 900
R 857 901 - R1 817 000
R1 817 001 +
Rates of tax
18% of each R1
R 42 678 + 26% of the amount over
R 77 362 + 31 % of the amount over
R121 475 + 36% of the amount over
R179 147 + 39% of the amount over
R251 258 + 41 % of the amount over
R644 489 + 45% of the amount over
R 237 100
R 370 500
R 512 800
R 673 000
R 857 900
R1 817 000
Persons under 65
Persons 65 and under 75
Persons 75 and over
Taxable income
2023
2024
R 91 250
R 95 750
R141250
R148217
R157 900
R165 689
Amounts deductible from the tax payable
Persons under 65
Persons 65 and under 75
Persons 75 and over
2023
R16 425
R25 425
R28 422
2024
R17 235
R26 679
R29 824
MEDICAL AID
Monthly amounts deductible from tax payable 2023
Main member
R347
Main member with one dependant
R694
Main member with two dependants
R928
2024
R364
R728
R974
Each additional dependant qualifies for a credit of R246 (2023 : R234)
per month.
e 10
PKF
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DEDUCTIONS
The deduction in respect of business travel is limited to the allowance
granted and may be determined using actual expenditure incurred or on a
deemed cost per kilometre basis in accordance with the table below.
Accurate records of the opening and closing odometer readings must be
maintained in all circumstances.
As from 1 March 2010, the claim must be based on the actual distance
travelled for business purposes, supported by a log book.
The cost of the vehicle includes VAT but excludes finance costs. Where
actual expenditure is used the value of the vehicle is limited to R800 000
(2023 : R665 000) for purposes of calculating wear and tear, which must be
spread over a seven year period.
The finance costs are also limited to a debt of R800 000 (2023 : R665 000).
In the case of a leased vehicle, the instalments in any year of assessment
may not exceed the fixed cost component in the table.
DEEMED EXPENDITURE - 2023
Cost of vehicle
Does not exceed R95 000
Exceeds R 95 000 but not R190 000
Exceeds R190 000 but not R285 000
Exceeds R285 000 but not R380 000
Exceeds R380 000 but not R475 000
Exceeds R475 000 but not R570 000
Exceeds R570 000 but not R665 000
Exceeds R665 000
Fixed
R
29 836
52 889
76 033
96 197
116 438
137 735
159 031
159 031
Fuel
C
131,7
147,0
159,7
171,8
183,8
210,8
218,0
218,0
Repairs
C
40,9
51, 1
56,3
61,5
72,3
84,9
105,5
105,5
DEEMED EXPENDITURE - 2024
Cost of vehicle
Does not exceed R100 000
Exceeds R100 000 but not R200 000
Exceeds R200 000 but not R300 000
Exceeds R300 000 but not R400 000
Exceeds R400 000 but not R500 000
Exceeds R500 000 but not R600 000
Exceeds R600 000 but not R700 000
Exceeds R700 000 but not R800 000
Exceeds R800 000
Fixed
R
33 760
60 329
86 958
110 554
134 150
158 856
183 611
209 685
209 685
Fuel
C
141,5
158,0
171,7
184,6
197,6
226,6
230,5
234,3
234,3
Repairs
C
43,8
54,8
60,4
65,9
77,5
91,0
102,1
113, 1
113, 1
VARIABLE
Variable remuneration, such as commission, bonuses, overtime, leave
pay, night shift or standby allowances and reimbursive travel, is taxed on
a payment basis. As from 1 March 2023, this includes performance-based
remuneration. The rule applies to the deduction of PAYE,the employee's
gross income inclusion and the employer's income tax deduction.
PKF