CTAX12U - Taxation of Individuals Assignment - University of South Africa

Assignment Task

Question 1

Which one of the following statements is true?

• Normal tax, less rebates, less prepaid tax, gives net normal tax
• Taxable income, less provisional tax, less employees’ tax, gives final normal tax
• Normal tax, less employees’ tax, less provisional tax, gives net normal tax
• Gross income less exempt income less allowable deductions gives taxable
• Gross income, less exempt income, less allowable deductions, less rebates gives taxable

Question 2

Ingrid (33 years old and unmarried) has taxable income amounting to R720 000 for the 2023 year of assessment. Ingrid paid employees’ tax amounting to R190 000 during the year of assessment. Calculate her ‘normal tax’:

• R22 241 [((R720 000 – R708 310) x 41%) + R207 448] – R190 000
• R8 021 [((R720 000 – R708 310) x 41%) + R207 448] – R14 220 – R190 000
• R212 241 [((R720 000 – R708 310) x 41%) + R207 448]
• R198 021 [((R720 000 – R708 310) x 41%) + R207 448] – R14 220

Question 3

Desmond is a 65-year-old pensioner. Assume that his normal tax for the 2023 year of assessment is R185 000. Desmond paid employees’ tax amounting to R134 000 during the year of assessment. Assume that he incurred no medical expenditure during the current year of assessment. What is Desmond’s ‘net normal tax payable’?

• R162 986 [R185 000 – R14 220 – R7 794]]
• R170 780 [R185 000 – R14 220]]
• R28 986 [R185 000 – R14 220 – R7 794 – R134 000]]
• R160 385 [R185 000 – R14 220 – R7 794 – R2 601]]
• R26 385 [R185 000 – R14 220 – R7 794 – R2 601 – R134 000]]

Question 4

Julian died on 31 May 2022 at the age of 83. His normal tax is correctly calculated at R95 000. Assume that he incurred no medical expenditure during the current year of assessment. What is his ‘net normal tax payable’ for the 2023 year of assessment?

• R76 572 [R95 000 – (R24 615 x 274/366)]
• R70 385 [R95 000 – R24 615]
• R89 466 [R95 000 – (R22 014 x 92/366)]
• R17 692 [(R95 000 – R24 615) x 92/366]
• R88 813 [R95 000 – (R24 615 x 92/366)]

Question 5

Leila is 25 years old. Her net normal tax payable for the current year of assessment is R162 000. Her employer deducted R145 000 employees’ tax during the year. Leila is registered as a provisional taxpayer and her provisional tax payments for the 2023 year of assessment amounted to R21 000.

Her final normal tax liability or refund for the current year is…

• R4 000 refund

• R17 000 liability

• R141 000 liability

• R4 000 liability

• R162 000 liability

Use the following information to answer questions 6 to 8.

Thabang is 30 years old and married out of community of property. He has a two children, both under ten years of age. Thabang is a member of a medical aid fund and his wife and children are listed as depen- dants on the fund. Thabang contributed to the medical aid fund throughout the year of assessment.

Question 6

How much will Thabang’s medical scheme fees tax credit amount to for the 2023 year of assessment?

• R1 038 [R310 + R310 + R209 + R209]
• R12 456 [R310 + R310 + R209 + R209] x 12
• R11 244 [R310 + R209 + R209 + R209] x 12
• R49 824 [R310 + R310 + R209 + R209] x 12 x 4
• R37 368 [R310 + R310 + R209 + R209] x 12 x 3

Question 7

Make the following assumptions for the 2023 year of assessment:

None of the family members have a disability as defined. Thabang’s taxable income amounts to R390 000. Assume that his total medical aid contribution amounts to R64 000, and his annual medical scheme fees tax credit amounts to R11 000. Thabang also had qualifying medical expenses of R16 000 which were not covered by the medical aid fund.

Thabang’s additional medical expenses tax credit amounts to:

• Rnil [(R64 000 – (R11 000 x 4)) – R16 000 – (7.5% x R390 000)] x 25%
• R1 688 [(R64 000 – (R11 000 x 4)) + R16 000 – (7.5% x R390 000)] x 25%
• R6 750 [(R64 000 – (R11 000 x 4)) + R16 000 – (7.5% x R390 000)]
• R91 000 [(R64 000 + R11 000 + R16 000]
• R15 651 [(R64 000 – (R11 000 x 3)) + R16 000] x 3%

Question 8

Make the following assumptions for the 2023 year of assessment:

Thabang has a disability, as defined. His taxable income amounts to R390 000. You may assume that his total medical aid contribution amounts to R64 000, and his annual medical scheme fees tax credit amounts to R11 000. Thabang also had qualifying medical expenses of R16 000 which were not covered by the medical aid fund.

Thabang’s additional medical expenses tax credit amounts to:

• R1 688 [(R64 000 – (R11 000 x 4)) + R16 000 – (7.5% x R390 000)] x 25%
• R4 438 [(R64 000 – (R11 000 x 3)) + R16 000 – (7.5% x R390 000)] x 25%
• R5 911 [(R64 000 – (R11 000 x 3)) + R16 000 – (7.5% x R390 000)] x 3%
• R15 651 [(R64 000 – (R11 000 x 3)) + R16 000] x 3%
• R4 995 [(R64 000 – (R11 000 x 3)) – R16 000] x 3%

Question 9

Lilian is 80 years old. Her taxable income amounts to R195 000. You may assume that her total medical aid contribution amounts to R56 000, and her annual medical scheme fees tax credit amounts to R3 720. Lilian also had qualifying medical expenses of R22 000 which were not covered by the medical aid fund. She does not have a disability as defined.

Lilian’s additional medical expenses tax credit amounts to:

• R81 720 [(R56 000 + R3 720 + R22 000]
• R7 606 [(R56 000 – (R3 720 x 3)) – R22 000] x 33,3%
• R22 258 [(R56 000 – (R3 720 x 3)) + R22 000] x 33,3%
• R12 124 [(R56 000 – (R3 720 x 4)) + R22 000 – (7.5% x R195 000)] x 25%
• R17 388 [(R56 000 – (R3 720 x 3)) + R22 000 – (7.5% x R195 000)] x 3%

Question 10

Zanele is 42 years old. Her taxable income amounts to R265 000. You may assume that her annual medi- cal scheme fees tax credit amounts to R3 720 and her additional medical expenses tax credit amounts to R6 000. She paid prepaid taxes, amounting to R37 000, during the year of assessment.

Her final normal tax liability/(refund) for the current year amounts to:

• R29 292 [((R265 000 – R195 850) x 26%)+ R35 253] – R14 220 – R3 720 – R6 000
• R2 012 [((R265 000 – R195 850) x 26%)+ R35 253] – R14 220 – R37 000
• R204 060 [R265 000 – R14 220 – R3 720 – R6 000 – R37 000]
• R6 512 [((R265 000 – R195 850) x 26%)+ R35 253] – R3 720 – R6 000 – R37 000
• (R7 708) [((R265 000 – R195 850) x 26%)+ R35 253] – R14 220 – R3 720 – R6 000 – R37 000

Question 11

1. Taxpayer A: on 29 February 2023 he becomes conditionally entitled to a bonus of R25 000. He became unconditionally entitled to the bonus on 31 March 2023 and received payment on 15 April
2. Taxpayer B is a car salesman: a legally binding contract of sale is signed by a customer on 26 ^th February Taxpayer B receives payment of R310 000, from the customer, on 3 ^rd March 2023.
3. Taxpayer C: his family home burnt down during the year of assessment. On 29 February 2023 he received an amount of R800 000 from his insurance company, as compensation for the loss of the
4. Taxpayer D is a maths teacher: in October 2022 she agrees to provide ten maths lessons, for no charge, to the daughter of a motor vehicle mechanic. In exchange, the mechanic will repair taxpayer D’s vehicle for no charge. The two parties agree that the market value of their respective services is R3 000.

Which of the above receipts and accruals will be included in the various persons’ gross income, for the year of assessment ended 29 February 2023?

• Taxpayer A includes R25 000; taxpayer B includes R310 000; taxpayer C includes R800 000; taxpayer D excludes R3 000.
• Taxpayer A excludes R25 000; taxpayer B excludes R310 000; taxpayer C excludes R800 000; taxpayer D includes R3 000.
• Taxpayer A includes R25 000; taxpayer B includes R310 000; taxpayer C excludes R800 000; taxpayer D excludes R3 000.
• Taxpayer A excludes R25 000; taxpayer B includes R310 000; taxpayer C excludes R800 000; taxpayer D includes R3 000.
• Taxpayer A excludes R25 000; taxpayer B includes R310 000; taxpayer C includes R800 000; taxpayer D includes R3 000.

Question 12

Which of the following receipts would be included in ‘ gross income’ , in terms of the general definition in section 1 of the Act, or as a special inclusion in terms of paragraphs ( a ) to ( n ) of that definition?

1. A police reward of R10 000 received for providing information leading to the arrest and conviction of a .
2. A once-off retirement fund lump sum amounting to R650
3. A R50 000 cash
4. A once-off restraint of trade payment of R300 000, received by an employee on termination of their services to an employer.

• a, b & d
• a, b, c & d
• b & d
• b, c & d
• a, c & d

Question 13

In which one of the following cases would a natural person, not ordinarily resident in the Republic of South Africa, be a resident due to the physical presence test?

• Days in South Africa during the current (2023) year of assessment – 92 days;

Days in South Africa during the five previous years of assessment: 92 days (2022); 92 days (2021); 92 days (2020); 92 days (2019); 92 days (2018)

• Days in South Africa during the current (2023) year of assessment – 333 days;

Days in South Africa during the five previous years of assessment: 111 days (2022); 266 days (2021); 104 days (2020); 101 days (2019); 323 days (2018)

• Days in South Africa during the current (2023) year of assessment – 110 days;

Days in South Africa during the five previous years of assessment: 186 days (2022); 101 days (2021); 197 days (2020); 201 days (2019); 233 days (2018)

• Days in South Africa during the current (2023) year of assessment – 90 days;

Days in South Africa during the five previous years of assessment: 300 days (2022); 365 days (2021); 298 days (2020); 344 days (2019); 288 days (2018)

• Days in South Africa during the current (2023) year of assessment – 320 days;

Days in South Africa during the five previous years of assessment: 280 days (2022); 299 days (2021); 89 days (2020); 345 days (2019); 348 days (2018)

Question 14

Which one of the following is NOT exempt from income tax in terms of section 10?

• Study bursary received by an employee from her The employee was required to repay the bursary if she failed to complete her studies
• A benefit of R11 000 received in terms of the Unemployment Insurance
• Dividends received from a real estate investment trust (REIT).
• A uniform allowance received by an (She was required, in terms of her employment contract, to wear a special uniform that was clearly distinguishable from ordinary clothing).
• Amount paid by an employer to an employee to cover the cost of moving household furniture. The payment was made to assist the employee after he had been relocated by his employer to another

Question 15

Which combination of the following receipts will be tax exempt:

1. Alimony payments received in terms of a divorce order that was finalised in
2. An employer grants a bursary to an employee’s child for grade 12 The employee’s remuneration proxy is R700 000.
3. Interest earned on a South African savings account by a non-resident who spent four months in South Africa, during the current year of The non-resident does not have a business establishment in the Republic.
4. Compensation received in terms of the Workmen’s Compensation

Which of the above are tax exempt:

• (a), (b) and (c)
• (a), (b), (c) and (d)
• (a), (b) and (d)
• (a), (c) and (d)
• (c) and (d)

Question 16

Jacob (46 years old) is a South African resident and unmarried. He does not have a tax-free investment. Jacob received the following amounts during the 2023 year of assessment: South African interest of R27 000 and South African dividends of R3 000. He also received foreign dividends of R1 800 and foreign interest of R700. How much of Jacob’s investment income will be included in his “ income” ?

• R4 311 [(R27 000 – R23 800) + (R3 000 – R3 000) + (R1 800 – (R1 800 x 25/45)) + (R700 – (R700 x 25/45)]
• R4 589 [(R27 000 – R23 800) + (R3 000 – R3 000) + (R1 800 x 25/45)) + (R700 x 25/45)]
• R31 700 [R27 000 + R3 000 + (R1 800 x 25/45) + R700]
• R4 000 [(R27 000 – R23 800) + (R3 000 – R3 000) + (R1 800 – (R1 800 x 25/45)) + (R700 – R700)]
• R4 700 [(R27 000 – R23 800) + (R3 000 – R3 000) + (R1 800 – (R1 800 x 25/45)) + R700]

Question 17

Martha, aged 28 years, is married in community of property to Marvin, aged 30 years. During the 2023 year of assessment Martha received gross foreign interest from an offshore bank account of R1 000 and South African interest of R52 000. Marvin received a salary of R630 000 and net taxable rental income, of R220 000, from a South African property. They both do not have tax-free investments.

How much of these amounts will be included in Martha’s taxable income?

• R29 200 [(R1 000 + (R52 000 – R23 800) + R0 + R0]
• R112 700 [(R1 000 x 50%) + ((R52 000 x 50%) – R23 800) + R0 + (R220 000 x 50%)]
• R427 700 [(R1 000 x 50%) + ((R52 000 x 50%) – R23 800) + (R630 000 x 50%) + (R220 000 x 50%)]
• R124 600 [(R1 000 x 50%) + ((R52 000 – R23 800) x 50%) + R0 + (R220 000 x 50%)]
• R112 422 ( [(R1 000 x 50%) – ((R1 000 x 50%) x 25/45)) + ((R52 000 x 50%) – R23 800) + R0 + (R220 000 x 50%)]

Question 18

Carrying on a trade ”: Which one of the following statements is incorrect ?

• A person who is employed, and who only earns a salary, is not “carrying on a trade”.
• A profit motive is not a prerequisite for “carrying on a trade”.
• Selling of trading stock during the process of liquidation is not “carrying on a trade”.
• Passive investment activities are not classified as a “trade”.
• Deliberately selling merchandise at a loss, “for business purposes”, can be regarded as

Question 19

Which one of the following statements, regarding the general deduction formula, is incorrect ?

• A payment, subject to a resolutive condition, is not deductible .
• For an expense to be “actually incurred” it does not have to be “necessarily incurred”.
• Floating capital expenditure is not deductible in terms of the general deduction
• A taxpayer barters various assets (that he had previously bought), in order to acquire trading The cost of the assets, given in exchange, are deductible in terms of the general deduction formula.
• As a general rule, if a deduction is not claimed in the correct year of assessment it cannot be claimed in a later year.

Question 20

Which one of the following statements, regarding the general deduction formula, is incorrect ?

• Moneylenders are permitted to deduct expenditure incurred in the production of interest
• Where an item of expenditure is the subject of a bona fide legal dispute, the courts have held that it lacks the degree of certainty and finality to render it “actually incurred.”
• Expenditure “incurred” is not necessarily expenditure “paid”.
• In order to be deductible, expenditure has to produce income during the year in which it is
• The cost of improving the income-earning structure of a person’s business is not deductible in terms of the general deduction formula.

Question 21

Bashir is employed as a salesman. He earns 70% of his remuneration in the form of commission from sales. In completing his 2023 income tax return, he claimed the following expenses that he had incurred during the year of assessment:

(i) Insurance premiums paid against the loss of income in case he becomes ill.

(ii) The cost of tickets to a music concert. The tickets were in respect of entertaining his employer’s clients.

(iii) Wear and tear on his new personal laptop computer. He uses the laptop to generate employment related income.

(iv) Home office expenses. Bashir has to maintain a home office as a requirement of his employment.

(v) Contributions to a provident fund.

Which one of the following combinations of the above are allowable tax deductions for Bashir:

• (i), (ii) and (iii)
• (i), (ii), (iii), (iv) and (v)
• (ii), (iii) and (v)
• (iii) and (iv)
• (ii), (iii), (iv) and (v)

Question 22

Alfred’s taxable income for the 2023 year of assessment amounted to R370 000. Alfred’s gross remuneration amounted to R390 000 during the 2023 year of assessment. Alfred’s gross remuneration includes a basic salary of R310 000.

Alfred’s employer made contributions, in his name, to a pension fund. Those contributions amounted to R64 000. Alfred also made contributions to the pension fund amounting to R44 000.

Alfred’s pension fund contribution deduction for the 2023 year of assessment amounts to:

• R108 000 [(R64 000 + R44 000) = R108 000] limited to the lesser of 27,5% x R390 000 =R107 250 or, R350 000
• R101 750 [(R64 000 + R44 000) = R108 000] limited to the lesser of 27,5% x R370 000 =R101 750 or, R350 000
• R107 250 [(R64 000 + R44 000) = R108 000] limited to the lesser of 27,5% x R390 000 =R107 250 or, R350 000
• R44 000 R44 000 limited to the lesser of 27,5% x R390 000 = R107 250 or, R350 000
• R85 250 [(R64 000 + R44 000) = R108 000] limited to the lesser of 27,5% x R310 000 =

R85 250 or, R350 000

Question 23

Lilian earned a total remuneration package of R360 000 during the 2023 year of assessment. The package included a basic salary of R320 000.

Lilian’s employer made contributions, in her name, to a provident fund. The contributions amounted to R40 000. Lilian also made contributions to the provident fund amounting to R60 000.

Lilian also contributed to a retirement annuity fund during the 2023 year of assessment. Those contributions amounted to R15 000.

You may assume that Lilian’s taxable income, before taking the pension fund and retirement annuity fund contributions into account, amounted to R405 000.

What deduction, in respect of the provident fund and retirement annuity fund contributions, will Lilian be allowed to claim as a deduction for the 2023 year of assessment?

• R100 000 [R40 000 + R60 000 = R100 000] limited to the lesser of 27,5% x R405 000 = R111 375 or, R350 000
• R111 375 [R40 000 + R60 000 + R15 000 = R115 000] limited to the lesser of7,5% x R405 000 = R111 375 or, R350 000
• R88 000 [R40 000 + R60 000 + R15 000 = R115 000] limited to the lesser of 27,5% x R320 000 = R88 000 or, R350 000
• R99 000 [R40 000 + R60 000 + R15 000 = R115 000] limited to the lesser of 27,5% x R360 000 = R99 000 or, R350 000
• R115 000 [R40 000 + R60 000 + R15 000 = R115 000] limited to the lesser of 27,5% x R405 000 = R111 375 or, R350 000

Question 24

Simon earned a total remuneration package of R1 280 000 during the 2023 year of assessment.

He contributed to a retirement annuity fund during the year of assessment. Those contributions amounted to R320 000. Simon also has disallowed contributions carried forward from the prior year amounting to R45 000.

You may assume that Simon’s taxable income, before taking the retirement annuity fund contributions into account, amounted to R1 100 000.

What deduction, in respect of the retirement annuity fund contributions, will Simon be allowed to claim as a deduction for the 2023 year of assessment?

• R352 000 [R320 000 + R45 000 = R365 000] limited to the lesser of 27,5% x R1 280 000 = R352 000 or, R350 000
• R320 000 [R320 000 limited to the lesser of 27,5% x R1 280 000 = R352 000 or, R350 000]
• R302 500 [R320 000 + R45 000 = R365 000] limited to the lesser of 27,5% x R1 100 000 = R302 500 or, R350 000
• R350 000 [R320 000 + R45 000 = R365 000] limited to the lesser of 27,5% x R1 280 000 = R352 000 or, R350 000
• R365 000 [R320 000 + R45 000 = R365 000] limited to the lesser of 27,5% x R1 280 000 =R352 000 or, R350 000

Question 25

Assume that Eleanor’s taxable income is R177 000, before taking into account her taxable capital gain and her donation to an animal welfare organisation (a public benefit organisation). You may assume that her taxable capital gain was correctly calculated at R16 000. Her donation (for which she received a section 18A receipt) amounted to R22 000.

What will Eleanor’s income tax deduction be for the donation to the public benefit organisation?

• R17 700 [R22 000, limited to 10% x R177 000 = R17 700]
• Rnil [Donations to animal welfare organisations are non-deductible]
• R19 300 [R22 000, limited to 10% x (R177 000 + R16 000) = R19 300]
• R22 000 [R22 000, limited to 10% x (R177 000 + R16 000) = R19 300]
• R100 000

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