 |
GTA711S- TAXATION 310- 2ND OPP- JUNE 2023 |
|
|
1 Page 1 |
▲back to top |
n Am I BI A u n IVER s ITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES& EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOROF ACCOUNTING
QUALIFICATION CODE: 07BAOC
LEVEL: 7
COURSECODE: GTA711S
COURSE NAME: TAXATION 310
SESSION: JULY2023
PAPER: THEORY& APPLICATION
DURATION: 3 HOURS
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) Mr. G Jansen, Mrs. Y van Wyk & Mr. T Elago
MODERATOR: Ms. F Haimbala
INSTRUCTIONS
1. This question paper is made up of four (4) questions.
2. Answer ALL the questions and in blue or black ink.
3. Start each question on a new page in your answer booklet.
4. Please remove the last page of this paper and insert it in your answer booklet.
5. The names of people and businesses used throughout this examination paper do not
Reflect reality and may be purely coincidental.
6. Questions relating to this examination may be raised in the initial 30 minutes after the
start of the paper. Thereafter, candidates must use their initiative to deal with any
perceived error or ambiguities & any assumption made by the candidate should be
clearly stated.
THIS QUESTION PAPER CONSISTS OF 13 PAGES {Including this front page)
1
|
|
2 Page 2 |
▲back to top |
QUESTION 1
(40 MARKS)
Natasha Joubert, a resident of Namibia who completed her master's degree in creative arts,
started a dance academy business called DanceNAM Entity, in Windhoek. She signed a 15-year
lease agreement for a dance hall in Klein Windhoek on pt August 2022. A monthly rental of
N$10,000 is payable from the commencement of the lease. In addition, she is obliged to
improve the dance hall at a cost of N$1500 000. A lease premium of N$80,000 was also payable
on 1st August 2022. The improvements were completed on 1st January 2023 at a cost of
N$1300 000.
The statement of profit or loss for the year of assessment 2023 revealed a net profit of
N$2 350,000 before the following receipts and accruals were taken into account:
Receipts and Accruals:
Local dividends were received from Allan Grey Namibia, N$50,000
Interest from a loan granted to her lazy brother, N$11,000
Expenses:
Employee benefits expenses totalling N$400,000 were paid to employees. This amount consists
of:
Permanent employees
N$ 300,000
Non-permanent employees
N$ 17,000
Pension fund contribution for permanent staff
N$ 33,000
Medical aid contributions (employer only)
N$ 50 000
Administrative expenses:
Rent expenses (Dance Hall Klein Windhoek)
N$70,000
Municipality costs
N$ 28,000
Telephone expenses
N$ 24,000
Repairs and Maintenance
N$18,000
2
|
|
3 Page 3 |
▲back to top |
Annuities paid to employees:
On 1 September 2022 one of the employees, Uncle G, was killed during the repairs done to the
dance hall. Due to the poor financial status of his widow, the business decided to pay her an
annuity of N$2,000 per month for the next 2 years.
On the same day Neelsie who is currently employed by DanceNam Entity was injured in the
same accident. Due to the severity of his injuries, he will not be able to take up employment.
An annuity of N$5,000 per month. is payable to him.
Credit losses:
An interest free loan was granted to Uncle G on 1 March 2022 to enable him to do repairs on
his private vehicle.
Natasha Joubert decided not to recover the sum from uncle G's widow. The amount of the loan
was N$50,000.
Provision for credit losses:
DanceNAM considers 5% of the outstanding accounts receivable to be doubtful.
The outstanding accounts receivables (excluding the loan interest relating to uncle G above) for
the 2022 year of assessment amounted to N$75,000 and N$130,000 for the 2023 year of
assessment.
Other
DanceNAM incurred other deductible expenses of N$20,000.
She also purchased a foot arch stretcher at a cash price of N$200,000. Delivery and transport
charges were N$5,000 and a total amount of N$ 15 000 has been paid as import duties
(customs and exercise) on the foot arch stretcher. The foot arch stretcher is just one of the
modern-day equipment used in dancing.
3
|
|
4 Page 4 |
▲back to top |
Depreciation:
PPE ITEM
Purchase date
Suzuki Bike
1/8/2022
Dance Equipment (Foot Arch 1/7/2021
Stretcher Machine)
Office Furniture
1/1/2023
Cost Price
25,000
200,000
100,000
Depreciation
policy
5 years, straight
line method
2 years, straight
line method
4 years, reducing
balance method
REQUIRED:
Calculate the taxable income of Natasha Joubert for the 2023 year of assessment. Commence
your answer with the net profit of N$2 350,000 and show all your working.
(40)
Note: Marks will be allocated for the reasons where applicable.
QUESTION 2
(25 MARKS)
Willem Swartbooi is a farmer in the Hardap region, and he supplies you with the following
information for the year ended 28 February 2023.
N$
Transfers of cows and calves to Botswana
Market value at transfer date:
Cows
25 000
Calves
Cost price of transferred livestock
Cows
Drilling of borehole - wages paid
4
10 000
14 000
30 000
|
|
5 Page 5 |
▲back to top |
Drilling of borehole - material purchased
Cattle sold
Maize sales
Land rentals income
Cattle purchased
Erection of employee houses
General farming expenses - all deductible
Fencing erected
257000
800 000
110 000
96 000
557 000
200 000
342 000
18 250
Notes
1. On the 17th of June 2022, Willem and his family consumed 5 cows. The market value of
one cow is N$5,750. He also donated 4 cows (cost N$3 000) to the local farmers union
festival on the same date.
2. Willem hired 3 additional employees in the current year and constructed houses for
each employee at the cattle posts.
3. Willem received a provident fund payout on 1 April 2022 of N$275 000. He used
N$200 000 to purchase an annuity which will pay out for a period of 10 years N$2 500
per month as from 1/4/2022. His life expectancy at that date was 20,61 Years.
He used another N$75 000 of the payout and paid it into another approved Provident
fund.
REQUIRED:
Calculate the taxable Income for Willem Swartbooi for the 2023 year of assessment. (25)
Marks will be allocated for reasons whenever an amount is excluded from your calculation.
5
|
|
6 Page 6 |
▲back to top |
QUESTION 3
(30 MARKS)
Junius & Julio are partners in a business, providing consulting services to politicians in Namibia
and South Africa. They are both residents of Namibia.
They share profits in the ratio 40:60 respectively. An extract of the income statement for the
year ending 28 February 2023 reveals the following:
Income
Consulting Fees
"Local" dividends
Bad debts recovered (note 3)
Expenses
Partners salaries: Junius
: Julio
Interest on capital accounts paid: Junius.
: Julio
Insurance premiums (note 1)
Bad debts (note 2)
Donation to charity (no certificate received)
Depreciation (note 6)
Design costs (note 5)
Profit for the year
N$
812,200
120,000
10,000
120,000
180,000
45,000
67,500
18,750
20,000
12,250
16 800
20,000
441,900
Notes:
1. The insurance premiums paid are on the joint lives of the partners.
2. Included in the N$20,000 for bad debts is N$ 10 000 which was lent to an employee,
who is unable to pay it back.
3. During the 2023 year of assessment, the partners recovered N$10,000 from Rafiek, a
client. In the 2022 year of assessment the partners had rendered services to Rafiek.
Rafiek experienced financial difficulties when he was fired as the police minister by the
new president, therefore the partners decided to write off his debt.
6
|
|
7 Page 7 |
▲back to top |
4. Julio received interest of N$50,000 on a savings account held at Netbank Bank Namibia.
5. The partners incurred N$20 000 to design their business logo "ANCEF" on the 1 January
2023. The design will be used for the next 4 years.
6. The entity acquired furniture and fittings for their office from Game Stores Namibia at
the beginning of the previous (prior year). The furniture and fittings were valued to last
for 4 years on the purchase date.
REQUIRED:
Calculate the normal tax liability for each partner for the 2023 year of assessment.
(30)
QUESTION 4
(SMARKS)
Fortune (Pty) Ltd is an accounting and tax consulting company operated from the private
residence of Wilmore Stranger, the sole shareholder of the company. He has converted a
granny flat, located on the same stand as his private residence, into company offices. Fortune
(Pty) Ltd has concluded the following transactions for the year of assessment ended 28
February 2023 and requires your advice on the correct tax treatment of each of the transactions
below:
1. N$3 700 paid to Maintenance Man on 15 September 2022 to replace the front door of the
offices that was damaged by an angry client. Fortunately, the full amount could be recovered
from the company's insurance.
(3)
2. N$750 paid to Nam RA on 31 October 2022 for administrative penalties relating to the late
submission of the annual income tax return for the 2021 year of assessment.
(2)
REQUIRED:
Briefly discuss whether or not the expenses relating to the transactions 1 and 2 above would be
deductible by Fortune (Pty) Ltd for the 2023 year of assessment in terms of the general
deduction formula section 17 and section 24 (prohibited deductions) of the Income Tax Act.
END OF EXAMINATION PAPER
7
|
|
8 Page 8 |
▲back to top |
TAXABLE INCOME {N$}
0-50 000
50 001-100 000
100 000 - 300 000
300 001 - 500 000
500 001- 800 000
800 001 - 1 500 000
Above 1 500 000
TAX TABLE
INDIVIDUAL INCOME TAX
RATES OF TAX FROM YEARS OF ASSESSMENT ENDING 2022 /
2023 {N$)
Not taxable
18% for each N$ above 50 000
9 000 + 25% for each N$ above 100 000
59 000 + 28% for each N$ above 300 000
115 000 + 30% for each N$ above 500 000
205 000 + 32% for each N$ above 800 000
429 000 + 37% for each N$ above 1 500 000
8