ENGLISH
FINANCIAL PLANNING INSTITUTE OF SOUTHERN AFRICA
BOARD ASSESSMENT
RFP (1)
February 2006
Time:
09h00 to 12h00
Total marks:
100
This examination paper comprises 15 pages and 100 questions. Answer all the questions.
The questions must be answered on this document and no candidate may leave the
examination room without handing in this document.
Only answers in your own handwriting on the OFFICIAL ANSWER SHEET will be
considered.
NB Please complete the table below
Surname
First name
ID Number
Member Number
Examination Centre
Employer
Instructions (please read before you answer any questions)
This examination paper consists of two sections.
Section 1
This section comprises 20 (twenty) true or false questions. State whether the answer to each
question is TRUE or FALSE by marking the appropriate box with an X on the OFFICIAL
ANSWER SHEET.
Each question counts 1 (one) mark. There will be no negative marking.
Section 2
This section comprises 80 (eighty) multiple choice questions. Four (4) possible answers are
given in respect of each question. Each question counts one (1) mark. Only one possible
answer must be selected and marked. There will be no negative marking.
2
Section 1 (TRUE or FALSE)
1.
The term “spouse” as defined in the Pension Funds Act includes a partner of the
deceased member in a permanent heterosexual relationship.
2.
An adviser may mix client funds with his personal funds as long as he keeps record of all
the transactions.
3.
Clients should be provided with access to internal and external complaint handling
mechanisms.
4.
Employer contributions to a pension fund are deductible up to 10% of the employee’s
approved remuneration.
5.
In terms of section 37C of the Pension Funds Act a person who is not a dependant can
also qualify for a benefit in the event of the death of the member if he or she is nominated
as beneficiary, provided the nomination was made on or after 30 June 1984.
6.
A member of a provident fund is not allowed a tax deduction in respect of contributions
that he/she made to the fund but will receive a return of those contributions tax-free on
retirement.
7.
The tax-free lump sum that a taxpayer is entitled to receive in respect of a retirement
annuity lump sum on retirement is a minimum of R120 000. This is in addition to the
R120 000 that is tax-free in respect of pension and provident fund lump sums.
8.
A member of a pension fund dies. The lump sum payable by the fund is subject to a
minimum tax-free amount of R30 000.
9.
The taxable portion of a lump sum benefit payable by a pension fund on the resignation
of the member is taxable at the member’s normal (marginal) rate of tax.
10.
A member of a retirement annuity fund who has discontinued his contributions can
reinstate himself as a member of the fund by meeting the conditions prescribed in the
fund. In addition to that his current contributions must have been paid in full.
11.
One of the essential terms and conditions of a buy-and-sell agreement is that, in the
event of the death of a partner, the surviving partner/s will have the option to purchase
the interest of the deceased and the estate of the deceased will be obliged to sell the
deceased partner’s interest should the surviving partner exercise his option to purchase.
12.
In a buy-and sell agreement the purchase price of the interest of a deceased partner
must always be stated as an amount equal to the proceeds of the life insurance policy
taken out for this purpose on the life of the deceased partner.
13.
A keyperson life insurance policy owned by a company is always exempt from estate
duty in the event of the death of the Keyperson (employee).
14
A conforming policy will become a non-conforming policy if a loan is taken from a bank
and the policy is ceded as security for such loan.
2
15.
3
Sole proprietors can be members of a deferred compensation scheme, but are not
allowed to be members of pension and provident funds established for the benefit of the
employees of such sole proprietor.
16.
A taxpayer (resident) qualifies for an exemption of R30 000 per annum in respect of
donations made. Property so donated will however be subject to estate duty on the death
of the donor.
17.
Foreign dividends are exempt from tax in the hands of a South African resident.
18.
Tom is given the private use of a motorcar by his employer. His employer pays for all the
fuel and maintenance. The purchase price of the car was R250 000 (Including VAT). The
amount on which Tom will be taxed monthly in the 2007 tax year is R5 482.
19.
John receives an annual travel allowance of R60 000. The full R60 000 will be included in
his gross income.
20.
An adopted child may not inherit intestate from his adoptive parent.
Section 2 (MULTIPLE CHOICE)
Question 21
Drew invests a lump sum of R150 000 for a period of 10 years at an interest rate of 7% per
annum. On maturity he will receive the following amount.
A
R301 449
B
R333 743
C
R324 539
D
R295 073
Question 22
Letitia buys a house and takes a loan of R800 000 for a period of 20 years. The interest rate is
8%. Her monthly instalment will be?
A
R6 647
B
R6 692
C
R5 851
D
R6 587
Question 23
Frans buys a new car for R550 000. He pays a deposit of R50 000 and takes a loan from the
bank for the balance for a period of 3 years. His monthly instalment is R15 668,18. What is
percentage interest that he pays on the loan?
A
8% per annum
B
6,9% per annum
C
7,8% per annum
D
9% per annum
Question 24
Billy Bunter wins the Lotto and invests the money for 10 years at an interest rate of 11% per
annum. After the 10 years he receives R940 515,61. What is the capital sum that Billy invested?
A
R314 643
B
R320 621
C
R300 000
D
R331 235
3
4
Question 25
Gerald (45 years old) and Jamima are married in community of property. Gerald earned rental
income of R90 000 and interest of R32 000 during the current tax year. What is the total amount
that will be included in Gerald’s gross income?
A
R61 000
B
R122 000
C
R106 000
D
R107 000
Question 26
Raoul is 56 years old and earned interest of R10 000 from a local source and a further amount
of R22 000 by way of foreign interest during the 2006 tax year. The total tax exemption for
which he qualifies is:
A
R15 000
B
R16 000
C
R12 000
D
R22 000
Question 27
Ellen (age 40) and Michael (age 45) are married in community of property. Between them they
earn a total of R80 000 in local interest. In the 2006 tax year they will each qualify for an interest
exemption of:
A
R7 500
B
R15 000
C
R30 000
D
R25 000
Question 28
Tsepo is a member of his company’s provident fund. He contributes 7% of his salary to the
provident fund and 10% of his salary to the company’s pension fund. His annual salary is
R450 000. The maximum amount he can deduct for income tax purposes is:
A
R33 750
B
R76 500
C
R31 500
D
R45 000
Question 29
Company A sells an asset and makes a capital gain of R300 000. Take into account any
possible annual exclusion and the company inclusion rate. Calculate the amount of CGT
payable by the company. It is:
A
R87 000
B
R21 025
C
R42 050
D
R43 500
Question 30
Which one of the following statements is correct with regard to the annual exclusion for
individuals with regard to capital gains tax?
A
A R10 000 annual exclusion is allowed once per year of assessment.
B
A R10 000 annual exclusion is allowed for each capital gain made during the
year of assessment.
C
A R50 000 annual exclusion is allowed once per year of assessment.
D
A R50 000 annual exclusion is allowed for each capital gain made during the
year of assessment.
4
5
Question 31
The capital element of annuities:
A
Is always exempt from income tax.
B
Is exempt from income tax only if it was a voluntary purchase by a natural person
and the annuity is payable to the purchaser or his spouse.
C
Will remain tax exempt if the voluntary purchased annuity is ceded to a child of the
purchaser.
D
Is the only portion that is taxable under a voluntary purchased annuity.
Question 32
Trusts pay income tax:
A
At the same rate as individuals.
B
At a flat rate of 18%.
C
At a flat rate of 40%
D
At the average rate of the trustees of the trust.
Question 33
The tax-free portion of retirement benefits offered to members of only a provident fund
A
Is subject to a maximum of R24 000 plus own contributions.
B
Is limited to a maximum of R90 000.
C
Is subject to a minimum of R24 000 plus own contributions.
D
May not exceed years of membership multiplied by R3 000.
Question 34
John earns a salary of R50 000 from “standard employment” and interest of R250 000 in
respect of a fixed deposit with a bank. After the tax exemption he will only be taxed on
R235 000 in respect of the interest. John will be taxed in the following way:
A
His salary will be subject to SITE so that it is taxed separately from the interest. He
will therefore pay less tax than what he would have paid were the salary and
interest to be added together and he was then to be taxed on the cumulative
amount.
B
John will pay tax on the cumulative amount of R285 000 and will therefore not pay
less tax because of the SITE system.
C
John will be taxed on the interest only and not the salary.
D
John will be taxed on the salary but not on the interest.
Question 35
An individual who earns income of more than R10 000 per year and which is not defined as
remuneration must register as:
A
A PAYE taxpayer.
B
A SITE taxpayer.
C
A provisional taxpayer.
D
A normal taxpayer.
Question 36
As a general rule donations tax is payable by:
A
The donor
B
The donee
C
The donor and the donee in equal shares
D
Nobody
Question 37
An employee retires at the age of 60 and receives a deferred compensation gratuity of
R340 000. The taxable portion of the gratuity is:
A
R310 000
B
R220 000
C
R280 000
D
R310 000
5
6
Question 38
What is the maximum annual tax deduction that is allowed in respect of pension contributions
by an employee?
A
Greatest of 7,5% of retirement funding income or R1 750.
B
15% of non-retirement funding income
C
R1 750
D
R1 800
Question 39
Where the taxpayer (who is under the age of 65 years), his spouse, child or stepchild is a
handicapped person, the maximum tax deduction allowed in respect of medical expenses is:
A
All qualifying expenses.
B
All qualifying expenditure less R500.
C
All qualifying expenses exceeding 5% of taxable income.
D
A maximum of R100 000.
Question 40
Vincent is a member of a medical scheme. His employer contributes the full contribution of
R36 000 per annum. The portion of the contribution that will be included in Vincent’s gross
income is:
A
Zero
B
R12 000
C
R36 000
D
R24 000
Question 41
If an employee has more than one company car and both vehicles are used primarily for
business purposes, the employee will only be taxed on the private use of the vehicle with which
value?
A
The vehicle with the lowest value.
B
The vehicle with the highest value.
C
Both vehicles.
D
Half of each vehicle’s value.
Question 42
Capital gains tax is applicable only to capital gains made in respect of assets that have been
acquired:
A
Before 1 October 2001.
B
Before, on and after 1 October 2001.
C
On or after 1 October 2001.
D
After 30 September 2004.
Question 43
Peter died on 30 January 2006. The total base cost of all of his assets that were not for private
use is R2 500 000 and the total market value of these assets at the date of his death is
R6 000 000. Peter was not married. Peter’s CGT liability at date of death is: (Assume a marginal
tax rate of 40%):
A
R750 000
B
R1 000 000
C
R1 500 000
D
R2 000 000
Question 44
Private individuals have to be what age to be liable for income tax in South Africa?
A
16 years.
B
18 years.
C
21 years
D
No particular age, all the need is taxable income.
6
7
Question 45
Which one of the following actions constitutes advice under the FAIS Act?
A
Presentation of a brochure depicting factual information of a financial product.
B
Explanation of the underwriting process on risk products.
C
Suggestion to invest cash in a savings account with a bank.
D
Explanation of the claims procedure in the event of permanent disability.
Question 46
In terms of the General Code of Conduct (FAIS), when advice is given, record of the following
must be kept:
A
A brief summary of the information on which the advice was based plus a
financial needs analysis.
B
Which product options were considered for the client.
C
An explanation why the products recommended is likely to satisfy the client’s
needs and objectives.
D
All of the above.
Question 47
A policyholder may, in terms of the Policyholder Protection Rules (PPR):
A
Cancel any insurance transaction only after the policy document has been
issued.
B
Within a period of 30 days of receipt of the policy summary cancel any insurance
transaction by written cancellation notice sent to the insurer.
C
Cancel a policy only after an event insured against has occurred.
D
Within a period of 40 days of receipt of the policy summary cancel any insurance
transaction by written cancellation notice sent to the insurer.
Question 48
The Prevention of Organised Crime Act (POCA) of 1998:
A
Is legislation that creates detailed compliance obligations in order to ensure that
money laundering is kept tightly under control.
B
Creates the offences relating to money laundering.
C
Provides for the establishment of a Financial Intelligence Centre.
D
Affects all transactions done by financial institutions.
Question 49
When an intermediary replaces a financial product, he must:
A
Increase the premium to provide for cost of administration.
B
Only disclose information on the medical requirements.
C
Inform the client of the influence of the policy restriction regulations.
D
Disclose to the client the potential implications, cost and consequences of such a
replacement.
Question 50
The insurer must pay the following to a policyholder who cancelled a single premium policy
within the “cooling-off” period of 30 days:
A
All premiums paid plus growth if markets performed positively.
B
All premiums and monies paid, less the cost of risk cover and any negative
growth.
C
All premiums and monies paid less any administrative expenses (such as
commission and issuing costs).
D
All premiums and monies paid to the insurer, less policy fees.
7
8
Question 51
In terms of the Regulations to the Long-term Insurance Act the maximum benefit that an insurer
can pay to a policyholder within the extended restriction period (5 years) is the “restricted
amount”. This rule does not apply in respect of:
A
A loan taken against the policy.
B
A partial surrender taken within the period.
C
An amount paid on the death of the life insured within the stated period.
D
If the policy premium has not been paid for a period of more than two years.
Question 52
An insurer may issue the following voluntary annuity contract:
A
A five year annuity with the annuities payable six-monthly in advance.
B
A five year annuity with the annuity payable annually in advance.
C
A five year annuity with the annuity payable monthly in advance.
D
A five year annuity with the annuity payable quarterly in advance.
Question 53
The 20% rule (premium increases) will apply in the following case so that a new “restriction
period” will be created:
A
Monthly premium of R300. Additional (once of) premium of R500 paid in the 4th
month of the third year.
B
Monthly premium of R300. Premium increased to R500 per month in the 4th
month of the third year.
C
Annual premium of R12 000 increased to R13 000 at the beginning of the 3rd
year.
D
Single premium of R50 000 paid in year 1. Premium of R60 000 paid in year 3.
Question 54
A minor who is 16 years or older:
A
May execute a valid will.
B
May open an account at a bank but may not withdraw any funds without the
consent of his guardian.
C
May only execute a valid will if he is competent to give evidence in a court of law.
D
Must obtain written consent from his guardian to take out an insurance policy.
Question 55
Policy benefits (capital gains) received on the part disposal of a second hand (“traded”) policy:)
A
Are not subject to CGT.
B
Are subject to CGT and to determine the capital gain the full base cost can be
deducted from the amount withdrawn.
C
Are subject to CGT and to determine the capital gain a pro rata portion of the
base cost can be deducted from the amount withdrawn.
D
Are subject to CGT and no part of the base cost can be deducted from the
withdrawal amount.
Question 56
A marriage in community of property is:
A
A marriage whereby the joint estate takes up the responsibilities of each
spouse’s liabilities prior to the marriage.
B
A marriage whereby all debt incurred prior to date of marriage remains the
individual spouse’s own liability and is not the responsibility of the joint estate.
C
A marriage dispensation which cannot be changed other than by means of a
divorce.
D
A marriage dispensation where the husband reigns supreme regarding all the
assets in the joint estate.
8
9
Question 57
If two spouses are married in of community the joint estate can be divided between the spouses
if:
A
One of the spouse’s disposes of an asset of the joint estate without the consent
of the other spouse.
B
One of the spouse’s commits adultery.
C
The spouse’s contractually agree to do so.
D
On application by a spouse the Court orders the immediate division of the joint
estate on the basis that the conduct of the one spouse will seriously prejudice the
other spouse.
Question 58
A spouse married in community of property, can cede a life insurance policy on his own life and
that forms part of the joint estate, to another person:
A
If he obtains the written consent of his spouse.
B
If he obtains the oral consent of his spouse.
C
Without the consent of his spouse.
D
Without the consent of his spouse, but only if his spouse is not nominated as
beneficiary under the policy.
Question 59
Assets bequeathed and excluded from any existing or future joint estate due to a marriage
dispensation:
A
Will form part of the accrual in ante-nuptial contracted marriages where accrual is
included.
B
Will be excluded from the accrual calculation although any income generated
from such an asset will form part of the accrual in ANC marriages.
C
Will be excluded from any form of matrimonial dispensation and any income
earned from such assets will also be excluded by default.
D
Will automatically revert back to the donor in the event of the marriage being
dissolved.
Question 60
The LOA “benefit statement agreement” prescribes a net projection rate of:
A
12% for a high inflation scenario and 6% for a low inflation scenario.
B
15% for a high inflation scenario and 4% for a low inflation scenario.
C
12% for a high inflation scenario and 4% for a low inflation scenario.
D
10% for a high inflation scenario and 4% for a low inflation scenario.
Question 61
The maximum monthly amount of cover in terms of the LOA Code of Good Practice on Disability
Benefits is:
A
An overall maximum benefit of R31 500.
B
An overall maximum benefit of R60 000.
C
An overall maximum benefit of R42 000.
D
An overall maximum benefit of R75 000.
Question 62
The purpose of The Financial Intelligence Centre Act (FICA) is to:
A
Make the confiscation of the proceeds of unlawful activities possible.
B
Create the offences relating to money laundering.
C
Provide for the establishment of a Financial Intelligence Centre.
D
Establish a Criminal Assets Recovery Account.
9
10
Question 63
The office of the FAIS Ombud has been established to:
A
Ensure that intermediaries comply with FAIS.
B
Enforce fit and proper requirements.
C
Protect consumers from bad or inappropriate advice when it comes to financial
services.
D
Protect FSP’s from inappropriate complaints from consumers.
Question 64
The rules of intestate succession stipulate that:
A
If a descendant of the deceased repudiates his intestate inheritance and the
deceased was married, the surviving spouse of the deceased will inherit in his
place.
B
An adopted child of the deceased cannot inherit intestate from the estate of the
deceased.
C
An adoptive parent cannot inherit intestate from his adopted child.
D
Illegitimate children cannot inherit intestate from their biological parents.
Question 65
A person dies intestate and leaves a surviving spouse and two children. He was married out of
community of property with the accrual system excluded. His estate is worth R325 000
A
The surviving spouse inherits the entire intestate estate.
B
The surviving spouse and the children will each inherit one-third of R325 000.
C
The surviving spouse will inherit R125 000 and the children will inherit R100 000
each.
D
The children will inherit the R325 000 in equal shares and the surviving spouse
nothing.
Question 66
On 10 January 2005 Stephen executed a will in terms of which he bequeaths the residue of his
estate to his wife and should she predecease him the residue of his estate is to devolve upon
his son Geraint. On 1 July 2005 Stephen and his wife got divorced. Stephen died on 15 August
2005 without having revoked the stated will. His estate will devolve as follows:
A
His wife will inherit the residue of his estate.
B
His son Geraint will inherit the residue of his estate in terms of his will.
C
The will is invalid and his estate will devolve intestate. His wife and child will both
inherit intestate.
D
His son Geraint will inherit the residue of his estate in terms of the Intestate
Succession Act.
Question 67
The valid execution of a will requires:
A
That if a will consists of more than one page the testator signs the last page only.
B
That the testator and the witnesses sign in full on the last page and that they all
initial all the other pages.
C
The testator and witnesses to sign in full on the last page only.
D
The testator to sign at the end of the will and all the other pages on which the will
does not end. The witnesses only need to sign the last page.
Question 68
A person who signs a will as a witness:
A
Is disqualified from inheriting in terms of the will.
B
May be appointed as a guardian or trustee because of a nomination in such will.
C
Confirms that he or she is aware of the content and stipulations of the will.
D
May sign the will by way of making a mark.
10
11
Question 69
The following assets form part of Dave Bing’s estate.
House
R1 250 000
Car
R250 000
Jewellery
R 50 000
Cash
R 76 000
Life Policy A
R850 000
Dave’s wife is the beneficiary
Life Policy B
R350 000
Dave’s son is the beneficiary
Life Policy C
R450 000
Payable to his estate
What is the total amount of property in Dave’s estate?
A
R1 976 000
B
R1 626 000
C
R2 326 000
D
R2 500 000
Question 70
Same facts as in question 69 above.
What is the total deemed property in Dave’s estate?
A
R1 200 000
B
R800 000
C
R1 250 000
D
R1 650 000
Question 71
Same facts as in question 69 above.
The executor’s fees paid on Dave’s estate are
A
R82 832,40
B
R116 747,60
C
R96 797,40
D
R86 724,21
Question 72
Same facts as in question 69 above.
The master’s fees payable by Dave’s estate is
A
R 750
B
R 600
C
R 500
D
R 700
Question 73
Same facts as in question 69 above.
Dave bequeaths the residue of his estate to his son Gareth. The total amount in respect of a
section 4q deduction that applies to Dave’s estate is?
A
R1 500 000
B
R850 000
C
R350 000
D
R250 000
Question 74
A person who purchases a compulsory living annuity must draw an income every year that:
A
Is less than 5% of the capital value of the fund.
B
Exceeds 15% of the capital value of the fund.
C
Is not less than 5% and not more than 20% of the capital value of the
fund.
D
Is not less than 5% and not more than 15% of the capital value of the
fund.
11
12
Question 75
Sam has invested in a fully taxable fixed deposit of R120 000 at a rate of 9,5% pa. His marginal
tax rate is 38%. His after-tax rate of income, if the interest exemption is ignored, is:
A
9,5%
B
3,61%
C
5,7%
D
5,89%
Question 76
Jeremy invested a lump sum of R150 000 in an endowment policy. After 10 years the policy
matured at R300 634,70. His percentage annual return was:
A
7,2%
B
8,6%
C
7,3%
D
7,7%
Question 77
Brad died. He was a member of a pension fund. His salary for the last 12 months was R55 000.
The minimum tax-free portion in respect of a lump sum paid by the fund is:
A
R60 000
B
R55 000.
C
R110 000
D
R60 000
Question 78
Persons who get married and enter into an ante-nuptial contract without excluding the accrual
system are married:
A
Out of community of property.
B
In community of property.
C
Out of community of property with the exclusion of the accrual system.
D
Out of community of property with the inclusion of the accrual system.
Question 79
Albert died. He bequeathed his farm to his son Bernard subject to the condition that on
Bernard’s death it must go to his grandson Robert.
A
If Robert dies before Bernard, Robert’s rights will devolve upon his heirs.
B
If Robert dies before Bernard, Bernard will become the full owner of the farm.
C
If Robert dies before Bernard, the fiduciary value of the farm will be included in
Robert’s estate for estate duty purposes.
D
Bernard may sell the property during Robert’s lifetime.
Question 80
On the death of a member of a provident fund the taxable portion of the lump sum benefit will be
taxed at:
A
The average tax rate in the year of death.
B
The higher of the average tax rate in the year of death and the preceding year.
C
The normal (marginal) tax rate in the year of death.
D
The higher of the normal (marginal) tax rate in the year of death and the
preceding year.
Question 81
On the death of a member of a retirement annuity fund the maximum lump sum that may be
paid by the fund is:
A
The full death benefit.
B
One-third of the death claim value.
C
All contribution plus reasonable interest plus one-third of the death benefit that
remains (balance).
D
R120 000
12
13
Question 82
Select the correct statement that applies to Pension fund benefits in the event of divorce.
A
The non-member spouse is entitled to share in the pension interest which is the
withdrawal benefit at date of divorce.
B
Benefits awarded are payable at the time of divorce.
C
Benefits awarded are payable when the benefit accrues.
D
The member spouse has no right of recourse against the non-member spouse
for a refund of tax paid on benefits received.
Question 83
When calculating the tax-free portion of a lump sum received from a retirement annuity at
retirement, which of the following would apply?
A
Formula A and Formula B would be used to calculate the tax-free portion of the
lump sum.
B
Formula B would be used to calculate the tax-free portion of the lump sum.
C
Formulae A, B and C would be used to calculate the tax-free portion of the lump
sum.
D
If the lump sum is one third of the fund value at retirement, the full amount would
be tax-free.
Question 84
Select the statement that applies to withdrawals from pension and provident funds (no transfer
of benefits to another retirement fund is made).
A
The full amount withdrawn is taxed at the member’s marginal (normal) tax rate.
B
The full amount withdrawn is taxed at the member’s average rate of tax.
C
The first R1 800 withdrawn is tax-free, with the remainder being taxed at the
member’s marginal (normal) tax rate.
D
The first R1 800 withdrawn is tax-free, with the remainder being taxed at the
member’s average rate of tax.
Question 85
If a member resigns from a pension or provident fund and has made contributions to the fund
that has not qualified for tax deduction, the total contributions that were not tax deductible:
A
Can be added to the tax-free lump sum so that the tax-free lump sum is
increased by that amount.
B
Is not taken into account at all in the computation of the tax-free lump sum
C
Serves as a minimum tax-free portion, meaning that if the tax-free lump sum is
smaller than the contributions that did not qualify for tax deduction, an amount
equal to the contributions not deductible will become the tax-free lump sum.
D
Can be claimed as a tax deduction in the year of resignation.
Question 86
In determining the tax-free lump sum in respect of a government pension fund:
A
Only Formula C must be used.
B
Only Formulae A and B must be used.
C
Formula C must be used followed by the use of Formulae A and B.
D
No formula must be used as the lump sum is tax-free.
Question 87
Select the statement that applies to current contributions on retirement annuities:
A
The member can take up to 15% of retirement funding income as a tax
deduction.
B
A minimum of R1 750 will be allowed as a deduction, provided that an amount to
this value has been contributed.
C
7,5% of retirement funding income is allowed as a deduction.
D
R1 800 is allowed as a deduction.
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Question 88
Select the correct statement that applies to lump sum benefits on death from retirement annuity
funds:
A
The lump sum will be paid to the estate of the deceased member.
B
Both compulsory annuities and lump sum benefits received from retirement
annuity funds on death are subject to estate duty.
C
If no lump sum is taken one-third of the death claim value will still be subject to
estate duty.
D
Only the lump sum that paid is deemed to be property in the estate of the
deceased for estate duty purposes.
Question 89
When a member resigns from a pension fund and transfers his resignation benefits to a
preservation pension fund:
A
It will always mean that it is tax efficient irrespective of the number of years that
he was a member of the pension fund.
B
And his years of membership of the pension fund was less than 20, it may result
in his tax-free lump sum from the preservation fund being be less than R120 000.
C
He will be liable for income tax on the amount so transferred.
D
He can split the benefits between two different preservation funds.
Question 90
Preservation funds are available to employees who withdraw as members of their employer’s
pension or provident funds due to:
A
Retirement or resignation from the fund.
B
Retirement or resignation from the fund, or dismissal from employment.
C
Retirement, resignation or dismissal from employment, or if the fund is wound up.
D
Resignation or dismissal from employment, or if the fund is wound up.
Question 91
The term (“n” factor) used in Formula B in the Second Schedule to calculate the tax-free
portions of lump sum retirement fund benefits
A
Can be sourced from the fund that represents the longest period of membership.
B
May not exceed 50.
C
Is limited to the number of years the member would have had at retirement at
age 60.
D
Will be applied to every fund individually.
Question 92
Living annuity contracts:
A
Provide an income of between 5% and 20% per annum based on the total annual
value of the portfolio.
B
Provide investment guarantees.
C
Must be invested in the portfolios stipulated by the insurer.
D
Are like traditional annuities, in that income cannot grow if market conditions are
favourable.
Question 93
When transferring retirement benefits to a preservation fund
A
No pre-transfer access to funds is allowed.
B
Pre-transfer access to the fund value is allowed but limited to R1 800.
C
Access to the fund is allowed once before transfer and once after transfer.
D
Access to fund value at any time is subject to pre-approval by SARS.
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Question 94
Peter retires from a retirement annuity fund and receives a lump sum of R130 000. He was a
member of the fund for 19 years. He retired from a pension fund 5 years ago and received a
tax-free lump sum of R80 000 from that fund at retirement date. He was a member of the
pension fund for 10 years. The tax-free portion of the lump sum that he now receives from the
retirement annuity fund is:
A
R120 000
B
R80 000
C
R40 000
D
R130 500
Question 95
Adrian, Bart and Clint are partners in a partnership. Their respective interests are Adrian 45%,
Bart 35% and Clint 20%. A life policy on each life has been affected with the other partners as
the owners. If Clint dies, what will the payment ratio of the life cover to Adrian and Bart be?
A
45:35
B
45:20
C
35:20
D
45:25
Question 96
What waiting period will apply to a pre-existing sickness condition?
A
Late joiner penalty
B
General 3 month waiting period.
C
Specific 6 month waiting period.
D
Condition-specific waiting period.
Question 97
If a member has not had creditable coverage on a Medical Scheme for more than 25 years,
what will the maximum late joiner penalty be
A
13%
B
25%
C
50%
D
75%
Question 98
What is the maximum number of persons that could form a partnership that is a legal
relationship?
A
50
B
2
C
10
D
20
Question 99
The payment of a Restraint of Trade could be deducted for tax purposes by the employer:
A
Over a period of 3 years.
B
Over the period of the restraint.
C
Over the period of the restraint, or 3 years, which ever is the longest.
D
Any period that the employer chooses.
Question 100
The effective current tax rate (inclusive of STC) for companies is?
A
29%
B
36.89%
C
30%
D
37%
Total 100 marks.
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