CARMEN VENTER
WORKSHOPS FOR CFP®
EXAMINATIONS
2015
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INCOME TAX
INCOME TAX ACT
The Income Tax Act [ITA] incorporates the following taxes which is imperative for your studies:
Donations Tax:
Section 56 – 64
Dividend Tax:
Section 64B – 64N
Capital Gains :
8th Schedule and Section 26A
Retirement Benefits and Taxation:
2nd Schedule
Fringe Benefits:
7th Schedule and various Sections in the ITA
Employee’s Tax and Provisional:
4th Schedule and various Sections in the ITA
Micro Business and turnover tax:
6th Schedule
The other taxes which we will also discuss later in the workshop being:
Estate Duty, Transfer Duty and VAT [ Securities Transfer Tax – 0.25%]
THE BASE OF OUR TAX SYSTEM
Our point of departure starts off by the understanding that our tax system is ‘residence-based’ and , if
you are not a ‘resident’ then we switch over to a source-based system of taxation.
If you are a resident - you will be taxed on your WORLD WIDE income .
If you are not a resident – you will be taxed only on income that is derived from RSA.
DEFINITION OF RESIDENCE
Natural persons:
defined as either ordinarily resident or physical resident. The first test
is to establish whether you are ordinarily resident and, if this fails, we
will test for physical residency in terms of your presence in RSA.
Ordinarily resident: no definition but case law makes reference to ‘ a
residence in a place with some form of degree of continuity’
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Physical presence:
ALL the following requirements have to be met:
Physically present in RSA for a period or periods EXCEEDING
91 days in aggregate during the CURRENT year of assessment AND
91 days in aggregate during EACH of the FIVE years of assessment PRECEDING the
current year of assessment
AND
915 days in aggregate during the FIVE years of assessment PRECEDING the current year
of assessment.
BUT: a person ceases to be a physical resident if – he is physically outside of RSA for a
continuous period of at least 330 full days.
Persons other than Naturals:
It is incorporated or formed in RSA OR
It has it’s place of effective management in the RSA
NOTE: as from 1/1/2013 – in testing the ‘ effective place of management’ – you no
longer include [ie EXCLUDE]:
ANY FOREIGN COMPANY IF:
1. it is incorporated, established or formed in a country other than RSA
2. it has it’s place of effective management in RSA
3. qualifies as a CFC with a foreign business establishment
4. is subject to a high level of tax in a country other than RSA [75% of RSA tax]
FOREIGN INVESTMENT ENTITY
as defined in S1 of the ITA –not taking into account any activity that constitutes:
1. Financial Services as per the FAIS Act
2. services incidental to financial services where product is exempt from FAIS
3. Financial Services provider as per the FAIS Act in terms of licence issued under
S8 of the FAIS Act.
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PERSONS LIABLE FOR TAX
Classification of Taxpayers
 Natural Persons
Individuals
partnership
Special Trusts
(Deceased Estates)
 Non-Natural Persons
Companies/ CC’s
Small Business (S12E of the ITA)
Micro Business (6th Schedule to ITA)
REIT (S 25BB as of 1/4/2013)
 Trusts
Watch out for :- Personal Service Providers >80 % income from one ‘client’
(para 1 of the 4th schedule and Section 23(k) of the ITA)
Natural Persons
Sliding scale 18-40%
Trusts
40%
Non Natural Persons
28%
Turnover tax for Micro Business
Scale
Small Business
Scale
Now – to understand how the taxes are applied for each entity – we need to
first understand who qualifies . We need only explore Small Business and
Micro Business requirements:
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SMALL BUSINESS CORPORATION
 What is a Small Business Corporation? [s12E]





Any co-op, private company or cc
All shareholders must be natural persons & cannot own shares in any other company/cc
(only listed company or CIS*/ shareblock)
Gross income cannot exceed R20 million
Investment income & personal service income cannot collectively exceed 20% of gross
income
{refer to micro business professional
service definition}
Cannot be Personal Service Provider
Investment income?
 Dividends, foreign dividends, royalties, rental derived from immovable
property, annuities or income of a similar nature
 interest as in 24J [interest bearing arrangements]
 Proceeds derived from investment or trading in financial instruments (incl
futures/ options/ derivatives), marketable securities or immovable
property
IF YOU QUALIFY FOR SBC – YOU TAKE TAXABLE INCOME AND APPLY THE TAX TABLES
SMALL BUSINESS CORPORATION 2013/2014
R0
- R 67 111
R 67 112 - R 365 000
R 365 001 - R550 000
+ 20 852
R550 001 and above
+ 59 702
= nil
= 7% > 67 112
= 21% > 365 000
= 28% > 550 001
SMALL BUSINESS CORPORATION 2014/15
R0
- R 70 700
R 70 701 - R 365 000
R 365 001 - R550 000
R550 001 and above
= nil
= 7% > 70 700
= 21% > 365 000 + 20 601
= 28% > 550 001 + 59 451
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MICRO BUSINESS FOR TURNOVER
 What is a Micro Business? [6th Schedule]
 natural person or company (requirements)
 Qualifying Turnover does not exceed R1 million
 Must have February year end
[Vat requirement deleted as from 1/3/2012]
Qualifying turnover
‘means the total receipts from carrying on business activities EXCLUDING any:
Amounts of a capital nature and
Amounts exempt from normal tax :
Government grants
Import incentive rebates and
State subsidies for the promotion of film production
Thought?
Would I consider receipts of activities outside of SA for the purpose of the above?
 Who does not qualify to register as a Micro Business?
 Professional service: accounting; architecture; auditing; financial service broking; consulting;
education; real estate; sport; research…to name a few!
 Personal service provider or non-exempt labour broker
 If proceeds from disposal of business assets used mainly for business purposes > R1.5 mill over 3
years (or shorter)
 Person holds any shares/interest in a company other than permitted shares and interests (para
4 of 6th schedule)
 Natural Person: Professional service: If more than 20% total receipts from rendering service!
 In relation to a company:
o Shareholders not a natural person
o Shareholders hold shares/equities in company other than permitted investments
(excludes not trading & > R5000 or winding up/liquidating
o Is a PBO
o Is a recreational club
o Where more than 20% of total receipts is investment income and income from
rendering a professional service
o year end other than the last day of February of a year
 In relation to a partnership
o If any partner in partnership are not natural persons
o That person is a partner in more than one partnership
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o
Qualifying turnover of partnership exceeds R1 million.
Permitted Investments?
Shares in listed companies
Portfolio in collective investment schemes
Interest in body corporates and share blocks
Interest in venture capital companies
< 5% interest in social consumer co-op
< 5% interest in primary saving co-op banks
Interest in friendly society
Investment Income? in relation to a company for Micro Business
Includes only:
income in form of annuities, dividends, interest, rental derived from
immovable property, royalties or income of a similar nature and
Any proceeds derived from the disposal of financial instruments
 What amounts are included and or excluded from TAXABLE TURNOVER ?
 all amounts not of a capital nature, received from carrying on business activities in SA
BUT SPECIFIC INCLUSION:
 50% of proceeds on sale of a capital asset
 Investment income of a company

TURNOVER SPECIFICALLY excludes:
Investment income of natural persons (partnership/sole)
Government grants
Export incentive rebates and state subsidies for film production
Out of Investment Income – exclude dividends and foreign dividends [1/4/2012] for a
company
ie: investment income is INCLUDED – but do not take into account local or foreign
dividends
 Other important notes relevant to Micro Business
Dividend Tax – R200 000 exemption
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Received not accrued.
Excessive Capital Receipts > R1 500 000 of assets mainly used for business
Voluntary registration
Voluntary deregistration
must be after 3 years
Compulsory deregistration
cannot come back in
Thought?
How would we treat the deduction of retirement annuities and medical aid for an individual
who is registered as a Micro Business for trade purposes?
Could you have the situation where a natural/person has to submit two types of assessment?
IF YOU QUALIFY FOR A MICRO BUSINESS – YOU DETERMINE TURNOVER AND APPLY THE TAX TABLES
2012/2013
and 2013/2014 Tax Tables
AND 2014/2015 TABLES
R0 – R150 000
0%
R150 001 – R300 000
1% of amount above R150 000
R300 001 – R500 000
R1 500 + 2% of amount above R300 000
R500 001 – R750 000
R5 500 + 4% of the amount above R500 000
R750 001 and above
R15 500 + 6% of the amount above R750 000
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INCOME TAX – PRINCIPLES
REVENUE VS CAPITAL
Revenue: amount, cash or otherwise, received /accrued, excluding capital receipts/accruals, but
including specific amounts
Income Tax applies
Capital: no real definition – comes down to intention – is the sale a realisation of capital or was
the sale in the course of carrying on a business?
Capital Gains applies
During 2010 Mr Nkosi bought a house for R535 000 in JHB as he had relocated from Port
Elizabeth . He lived in the house until 2013, then sold it for R1 385 000. He sold the house
because he had been offered a job with RMB to head up its KZN division in Durban. He moved to
Durban in March 2014 – and subsequently purchased another house to live in down in DBN.
You are required to discuss whether the purchase and sale of the house has any income tax
consequences.
Thought?
What if Mr Nkosi decided to keep the house in JHB and rent it out. He now needs to paint this
residence.
Would this be a revenue or capital expense?
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INCOME TAX – FRAMEWORK
NON NATURAL PERSONS
-
TRUSTS, COMPANIES, CLOSE CORPS
INCOME
R XXXXXXXX
EXEMPTIONS
13/28 x dividend foreign
(R XXXXXXXX)
LESS EXPENSES AGAINST TRADE INCOME
(R XXXXXXXX)
ADD CAPITAL GAIN
R XXXXXXXX
TAXABLE INCOME
R XXXXXXXX
AT TAX RATE
R XXXXXXX = TAX LIABILITY
28% / 40% / SBC SCALE
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NATURAL PERSONS
INCOME (S1)
RXXXX
= GROSS INCOME
Less Exemptions (S10)
(RXXXX)
= INCOME
Less Deductions (S11)
Expenses (S11(a))
(RXXXX)
Pension (S11(k))
(RXXXX)
RA
(RXXXX)
(S11(n))
–
ADD ALLOWANCES (S8)
–
(add Capital Gain for calculation purposes)
–
–
–
–
RXXXX
Donations (S18A)
(RXXXX)
ADD capital gain to taxable income
RXXXX
= TAXABLE INCOME
Tax according to scale
Less rebates
Less medical credit rebates (if applicable)
LESS MEDICAL EXPENSES CREDITS
= TAXABLE INCOME
RXXXX
= TAX PAYABLE
Although the above ‘framework’ looks simple and oh so neat!...it is the detail under each section /
component above – that matters!
So – let us look a little closer and breakdown in detail what is included in each section…..
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next page………….
THIS IS A MORE DETAILED FRAMEWORK TO THE ONE ABOVE!
INCOME
Salary
Commission
Medical Aid Fringe Benefit
Company Car Fringe Benefit
Insurance Fringe Benefit
Trade Income
Local Interest
Foreign Interest
Local Dividend
Foreign Dividend
Insurance proceeds
Pension income
Compulsory annuities
Linked annuities
Restraint of trade
etc
GROSS INCOME
EXEMPTIONS
Local dividends 10(1)(k)
Foreign Dividends 10B
25/40 x div received natural
13/28 x div received non natural
Local interest (< 65 and > 65) 10(1)(i)
Voluntary annuity capital element 10A
Compulsory annuity exemption 10C
Insurance proceeds 10(1)(gG)
CIS 10 (1)(iB)
INCOME
R XXXXX
(R23 800 / R 34 500)
R XXXXX
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DEDUCTIONS
Expenses against trade S11(a)
R XXXXX
Pension fund contributions s11(k)
>of 7.5% of RFI or
R1750
AND arrear contributions of R1800 pa
R XXXXX
Retirement Annuity contributions S11(n)
R XXXXXX
R XXXXX
>of:
15% of NRFI or
3500 less pension contributions or
R1750
ADD
AND arrear contributions of R1800 pa
R XXXXXX
Section 8 allowances:
Taxable portion of car allowance
Entertainment allowance
Taxable portion of subsistence allowance
R XXXXXX
= taxable income at this stage
R XXXXXX
Less Donation S 18A
ADD
Taxable Capital Gain
TAXABLE INCOME
TAX AS PER THE TABLES
LESS REBATES: Primary rebate (all)
+ Secondary rebate (>65)
+ Tertiary rebate (>75)
LESS MEDICAL CREDIT (contribution)
R XXXXXX
R XXXXXX
R XXXXXX
12 726
7 110
2 367
R257 1st Member & 2nd each
R172 for each additional dependant
LESS MEDICAL EXPENSES CREDIT
(>65
OR < 65 OR DISABILITY)
TAX LIABILITY / CREDIT
ABOVE APPLIES TO THE 2014/2015 TAX FRAMEWORK
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LET US LOOK AT THE MEDICAL CREDITS IN MORE DETAIL WITH A COMPARISON TO THE
DEDUCTIONS THAT TOOK PLACE IN THE 2013/2014 TAX YEAR AND NEW TABLES WITH
INFLATIONARY RELIEF
MEDICAL CREDITS: FOR….SOMEONE…
Below the age of 65
Jane and Tom, married with 3 children – are all on Tom’s medical aid plan. Tom is 45 years old and they
have no disability. The medical contribution for the year has been R 56 000 and they have had out of
pocket expenses, not refunded by the medical aid, of R 15 000. Tom’s total earnings for the year is R300
000.
2013/2014 Year end of assessment [S18 of ITA]
Income:
300 000
Medical deduction allowed:
Contributions that exceed
4x credit rebate:
56 000 -46 560 = 9 440
Plus medical expenses
9 440+ 15 000 = 24 440
2014/2015 Year end of assessment [S6A & B of
ITA]
Income:
300 000
Taxable Income
300 000
Tax on income
Less primary rebate
Less medical credit
64 147
(12 726)
(12 360)
Less additional medical
Expenses credits:
The amount that exceeds
7.5% of 300 000
Contributions that exceed
4 x credit rebate
56 000 – 49 440] = 6 560
24 440 – 22 500 = 1 940
(1 940)
Taxable income
298 060
Plus medical expenses
6 560 + 15000 = 21 560
Tax on income
Less primary rebate
Less medical rebate
64 889
(12 080)
(11 640)
The amount that exceeds
7.5% of 300 000
21 560 – 22 500 = 0
Tax payable
41 169
25% of 0 =
Tax payable
TAX PAYABLE
41 169
(
0)
39 061
TAX PAYABLE
41 266
ADDITIONAL TAX OF R97 IF DIRECT COMPARISON
TO LAST YEAR TABLES
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MEDICAL CREDITS FOR SOMEONE:
Above the age of 65
Jane and Tom, married with 3 children – are all on Tom’s medical aid plan. Tom is 66 years old . The
medical contribution for the year has been R 56 000 and they have had out of pocket expenses, not
refunded by the medical aid, of R 15 000. Tom’s total earnings for the year is R400 000.
2013/2014 Year end of assessment [S18 of ITA]
Income:
Medical deduction allowed:
400 000
Full medical contributions
Full medical expenses
(56 000)
(15 000)
2014/2015 Year end of assessment [S6A & B of
ITA]
Income:
400 000
Taxable Income
Taxable income
329 000
Tax on income
Less primary & secondary
rebate
(18 830)
T ax payable
55 341
TAX PAYABLE
Tax on income
Less primary rebate &
Secondary rebate
Less medical credit
400 000
95 274.50
(19 836)
(12 360)
74 171
55 341
Less additional medical
Expenses credits:
33.3% of contributions
That exceed 3 x credit rebate
56 000 – 37 080 =18 920
X 33.3%
( 6 300)
33.3% of medical expenses
33.3% x 15 000
(4 995)
Tax payable
51 783.50
TAX PAYABLE
55 081
REDUCTION IN TAX OF R260 IF DIRECT
COMPARISON TO LAST YEAR’S TABLES
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MEDICAL CREDIT FOR SOMEONE WHO IS:
DISABLED
Jane and Tom, married with 3 children – are all on Tom’s medical aid plan. Tom is 45 years old . The
medical contribution for the year has been R 56 000 and they have had out of pocket expenses, not
refunded by the medical aid, of R 15 000. 1 child is disabled as defined. Tom’s total earnings for the year
is R300 000.
2013/2014 Year end of assessment [S18 of ITA]
Income:
300 000
Medical deduction allowed:
Contributions that exceed
4x credit rebate:
56 000 -46 560 = 9 440
( 9 440)
Plus medical expenses
In full
(15 000)
Taxable Income
Taxable income
275 560
Tax on income
Less primary rebate
Less medical rebate
58 139
( 12 080)
( 11 640)
T ax payable
34 419
TAX PAYABLE
2014/2015 Year end of assessment [S6A & B of
ITA]
Income:
300 000
34 419
Tax on income
Less primary rebate
Less medical credit
300 000
64 147
(12 726)
(12 360)
Less additional medical
Expenses credits:
33.3% of contributions
That exceed 3 x credit reb ate
56 000 – 37 080 =21 080
X 33.3%
( 6 300)
33.3% of medical expense s
33.3% x 15 000
(4 995)
Tax payable
27 766
TAX PAYABLE
29 736
REDUCTION IN TAX OF R4683 IF DIRECT
COMPARISON TO LAST YEAR’S TABLE
2013 /2014 tax tables
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SO – what we will be doing now is looking even in more detail of some of the
components of above - ie when we look at income – there are some
‘inclusions’ that require calculations to determine the rand value that is
included:………
INCOME
All income received or accrued, whether in cash or otherwise
Fringe Benefits
Basic Salary
Commission
Rental Income
Interest
Consulting fees/ trade income
Dividends
Annuities
Restraint of trade
Shares (if trading and incentive schemes)
and so on and so forth…
FRINGE BENEFITS OF IMPORTANCE
1. Company Car
Value of vehicle plus VAT
x 3.5% or 3.25% if maintenance = monthly value
less consideration paid by employee - except if payment by employee is in
respect of the license, insurance, maintenance or fuel.
x 12 = annual cash equivalent
At end of year:
IF accurate records of business km were kept, then:
reduce the cash equivalent as follows: cash equivalent x business km / total km
IF the commissioner is satisfied that accurate records of private kms were kept –
and the following payments were made by the employee, then the cash
equivalent of the private use is also reduced by the:
license cost paid by employee x pvt km / total km
insurance cost paid by employee x pvt km / total km
maintenance cost paid by employee x pvt km / total km
private mileage x tariff per km in respect of fuel cost as a fixed rate
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2. Accommodation
(A-B) X C/100 X D/12
 A – remuneration factor B – R67 111 (2013 = 63 556)
C = 17 or
18 if at least 4 rooms & unfurnished & power/fuel supplied by employer
OR Furnished but power/fuel not supplied by employer
19 if at least 4 rooms if furnished and power/fuel supplied by employer
EXEMPTIONS FOR 2014/2015
Local Dividends
[s10(1)(k)]
Foreign Dividends 25/40 for natural and 13/28 for other persons [s10B]
Interest
< 65
> 65
R 23 800 pa [S10(1)(i)]
R 34 500 pa
Voluntary Annuities - Capital element only [s10A]
Formula
y = a/b x c
Where:
A - cash consideration
B - total payment expected from assurer of life of annuitant or term of annuity
C -the amount of the annuity
Y – capital element which is exempt
Male aged 69 purchases a life annuity for R60 000. Annuity received R7 500pa.
What is his life expectancy?: 11.37
What are the total payments that can be expected:? 11.37 x 7500 = 85275
Apply formula to determine the capital amount:
60 000 / 85275 x 7500 = 5277 capital element that is exempt
OR
Cash consideration / life expectancy or term
Apply short cut formula to above example:
60 000 / 11.37 = 5277 capital element that is exempt
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Commutation of Voluntary Annuities
Section 10A(3)(c) The commuted value is taxable as Gross Income less an exempt amount as
per formula:
X = A-D
x exempt amount
Where:
A : the amount of the total cash consideration given by the purchaser under
the contract; and
D : the sum of the capital elements of all annuity amounts payable under the
annuity contract prior to the commutation
Mr purchased an annuity for R50 000. Annuity is R7000 of which capital element
is R4000. After 3 years annuity is commuted and annuitant receives a
commuted value of R41 000. What amount is part of GI?
Exemption:
50 000 – (4000 x 3 = 12000) = 38 000
41 000 – 38 000 = 3000 taxed amount
Compulsory Annuities – Exemption of ‘non-deductible contributions’ {1/4/2014}
Your client made the following contributions that did not rank for deductions over
the years:
Contributions to
RA
170 000
PENSION
250 000
PROVIDENT
150 000
TOTAL
570 000
Your client decided to retire and has following values:
THE FUND:
RA
500 000
PENSION
500 000
PROVIDENT
175 000
THE TOTAL 1/3RD VALUE FROM RA AND
PENSION TAKEN IN CASH
PROVIDENT TAKEN IN FULL
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333 333
175 000
TOTAL
BUT LESS PREVIOUS CONTRIBUTIONS
OBVIOUSLY LIMITED TO TAXABLE AMOUNT
508 333
(570 000)
IF ONLY R508 333 WAS TO BE TAXED BUT I HAD R570 000 IN
CONTRIBUTIONS THAT COULD BE USED TO REDUCE THE TAXABLE
- CAN YOU SEE THAT I HAVE EFFECTIVELY ‘LOST’ R61 667?
[ 570 000 - 508 333]
NOW WE ASSUME THE THE 2/3RD'S FROM ABOVE GENERATES AN ANNUITY OF
OF R100 000 A YEAR. AT THIS STAGE THE FULL ANNUITY (IRRESPECTIVE THAT I HAVE
LOST' R 61 667 IN DEDUCTIONS) IS FULLY TAXED AS INCOME
AS FROM 1/4/2014
IF WE TAKE THE ABOVE SCENARIO AND ASSUME THAT THERE ARE NO OTHER
LUMP SUMS ETC THAT BECOME PAYABLE
01/04/2014
YEARLY ANNUITY
LESS 'non deductible contribution'
200 000
(61 667)
Tax for income
138 333
IF FULL ANNUITY (IE NOTHING TAKEN AS CASH )
FULL ANNUITY
570 000 WERE CONTRIBUTIONS PREVIOUSLY DISALLOWED
ASSUMPTION THAT YEARLY ANNUITY WOULD BE:
LESS 'non deductible contribution'
200 000
(570 000)
NIL to tax and R 370 000 carried over to next year
YEARLY ANNUITY
LESS 'NDC'
210 000
(370 000)
Nil to tax and R 160 000 carried over to next year
etc
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Overseas pensions to residents –if as a result of prior non-residency [S10(1)(gC)]
Interest received by foreign persons if exempt under S37K.[S10(1)(h)] ** 1 July 2013
{not physically present in SA for more than 183 days in aggregate in 12 month period
and not trading}
SA resident that works outside of our borders [S 10(1)(0)]
‘for a period/s exceeding 183 full days in aggregate during any period of 12 months
AND for a continuous period exceeding 60 full days during that period of 12 months
DEDUCTIONS
every = expenses
11(a) the general deduction formula but limited by S23(g) . (23m also important)
All expenses and losses incurred in the production of income – actually paid in the same
year of assessment – not of a capital nature – whether in part or in full.
politician = pension
11(k) pension fund contributions allowed up to the greater of
7.5% of pensionable salary / non-retirement funding income
or R1 750
limited to actual contributions
AND Arrears max of R1800 pa
receives = retirement annuity
11(n) retirement annuity contributions to the greater of:
15% of non retirement funding income
R3500 – pension contributions
OR
R1750
Arrears R1800 pa
YOU CANNOT TAKE LUMP SUMS FROM RETIREMENT FUNDS AND OR SEVERANCE BENEFIT.
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ALLOWANCES THAT HAVE TO BE ADDED
Car allowances: portion related to private is part of taxable income:
Entertainment allowances (if not commission earner)
Subsistence allowances
donated = donations
S18A DONATIONS
Limited to 10% of taxable income at this point
allowances
- BUT includes capital gain and business
REBATES
Primary rebate for all
Secondary rebate >65 <75
Tertiary rebate > 75
2013/2014
2014/2015
R12 080
R18 830
R21 080
R12 726
R19 836
R22 203
R242
R242
R162
R257
R257
R172
Medical credit rebates
1st member
2nd member
3rd member onwards
2012/2013 TAX TABLES
TAXABLE INCOME
R
0
– 160 000
160 001 - 250 000
250 001 - 346 000
346 001 - 484 000
RATES OF TAX
R
0 + 18% OF EACH R1
28 800 + 25% of amount > 160 000
51 300 + 30% of amount > 250 000
80 100 + 35% of amount > 346 000
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484 001 - 617 000
617 001 AND ABOVE
128 400 + 38% of amount > 484 000
178 940 + 40% of amount >
2013/2014 TAX TABLES
TAXABLE INCOME
R
0
– 165 600
165601 - 258 750
258 751 - 358 110
358 111 - 500 940
500 941 - 638 600
638 601 AND ABOVE
RATES OF TAX
R
0 + 18% OF EACH R1
29 808 + 25% of amount > 165 600
53 096 + 30% of amount > 258 750
89 904 + 35% of amount > 358 110
132 994 + 38% of amount > 500 940
185 205 + 40% of amount > 638 600
2014/2015 TAX TABLES
TAXABLE INCOME
R
0
– 174 550
174 551 - 272 700
272 701 - 377 450
377 451 - 528 000
528 001 - 673 100
673 101 AND ABOVE
RATES OF TAX
R
0 + 18% OF EACH R1
31 419 + 25% of amount > 174 550
55 957 + 30% of amount > 272 700
87 382 + 35% of amount > 377 450
140 074 + 38% of amount > 528 000
195 212 + 40% of amount > 673 100
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Examples for practice
Example 1 – Residency test
Mr Smith is a British Citizen who has a house in London. He bought a house in Cape Town after spending
a holiday there. In the 2014 year of assessment he spent the whole year in his house in Cape Town.
Even though he spends a lot of time in CT he still regards London as ‘his home’ because he had always
worked there & only started visiting CT after he had retired. His presence in SA over the last 5 years is as
follows:
2013
200 days
2012
85 days
2011
165 days
2010
250 days
2009
30 days
You are required to determine whether or not Mr Smith is a resident of SA for tax purposes for year
ending 2014
Example 2 – Residency Test
Darren Mansfield emigrated from SA 10 yrs ago but retained some of his business interest in the
Republic & consequently visits his country of birth regularly. Over the past 10 yrs, Darren has spent the
following number of days in SA:
2007: 98
2006: 232
2007: 144
2008: 153
2009: 191
2010: 197
2011: 238
2012: 132
2013: 203
2014: 92
You are required to determine for which of the last 4 of the above mentioned years of assessment he
would NOT have been regarded as a resident for income tax purposes?
(6)
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Example 3 – Residency test
Radox Offshore Ltd is a Cayman Island Company, some of the shareholders of which live in SA. The
Directors of the company live in the UK and are employees of Barclays Bank. You are required to
determine whether or not the company is a resident for SA Tax purposes
Example 4 – Residency test
Tom, an ordinarily resident in the United States, earns he following income:
Salary
$40 000
Interest
$5 000 derived from UK
Dividends
$2 000 derived from RSA
Income
$12 000 derived from his involvement
within an established RSA Company.
Interest
$1 000 derived from RSA
Which, if any, of the above income will be taxed in RSA? Is there any other potential tax implications on
any of the above receipts?
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Example 5 – Turnover tax
a) If I carry business activities outside of SA, would I qualify for turnover tax?
b) I operate a business through a trust – can I qualify as a micro business?
c) If I am a registered Micro Business – which taxes am I exempt from?
Example 6 – Turnover tax
On 1/3/2013 Mohammed, 25 yrs old, started a new business as a company producing & selling candles.
He never registered as a vat vendor therefore qualifies as a Micro Business and registered as such in
March 2014.
The following information is relevant to his 2014 year of assessment – calculate his turnover tax liability
for 2014.






Cash Receipts
Interest – bank account
Dividends from listed shares
Proceeds - sale of a mixer
Expenses – purchase of mixer
Normal Trading expenses
R 380 000
R 25 000
R
250
R 20 000
R 35 000
R 105 000
Example 7 – Turnover tax
Use the same facts as above but, assume that he is trading as a sole trader = what would be different?
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Example 8 – Company Car
Tom joined a company in March 2014. Part of the package is the use of a company car to the value of
R450 000 VAT excluded but R 45 000 finance charges are include. The company however purchased this
car in March 2012. There is no maintenance plan.
In the 2014/2015 year of assessment – Tom noted the following mileage:
Total travel 43 000 KM of which 31 000 KM was business and 12 000 KM was private.
He paid R7 800 towards maintenance of the vehicle as well as fuel which amounted to R38 000 for the
year.
(a) Calculate the annual fringe benefit value that is included in gross income
(b) Calculate the reductions that he will be able to claim at the end of the year of assessment
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Example 9 – Accommodation fringe benefit
Bob’s employer provided him with residential accommodation for the entire 2014/2015 year of
assessment at an annual rental to Bob of R 4 800. The accommodation is furnished with full
services and has 6 rooms. Bob’s annual salary is R 150 000 with a fringe benefit for the use of the
company car to the value of
R 5 000 pa.
Calculate the annual fringe benefit if:
(a) accommodation is owned by the employer
(b) accommodation is rented by the employer from a 3rd party at a cost of R10 000 per year.
Example 10 Retirement fund calculations
Chris (40) ,a sales consultant with a large company received the following income during the year of
assessment:
 Commission of R300 000 . This is retirement funding income
 Expenses of R25 000 incurred in the production of commission.
 He is a member of a pension fund- in terms of the rules he contributed 8.5% of his commission
income earned.
 Interest of R20 000
 An annuity of R30 000 from a voluntary purchased annuity - the capital element of the annuity is
R11 000
 Rental income of R100 000 in respect of farm property
During the year he incurred expenses of R30 000 in respect of the construction of soil erosion
works on the farm property. These expenses are deductable in terms of section 17A
 Dividends of R34 000
 He speculates with residential fixed property and made a profit of R150 000 on the sale of a
house (no CGT as profit is taxable) . He had expenditure of R30 000 in the production of this
income
 He also received a bonus of R45 00 from his employer - this is no retirement funding income
 He contributed R3 000 to an RA during the year and his medical contributions were R19 000 pa
 He also donated R5000 to a PBO.
 He made a taxable capital gain of R 40 000
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a) What is his maximum allowable RA deduction?
b) Calculate the amount of Pension Fund contributions allowed as a deduction ?
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Example 11 – Taxable portion of car allowance
Tom receives an annual allowance of R75000. He recorded total mileage of 35000km of which 20000km
was business. He has spend: R52 000 fuel, R450 licence, R62 000 lease, R23 000 maintenance.
Calculate the taxable portion that has to be included into taxable income.
a) as per the facts above
b) assuming no record of expenses were kept
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Example 12- Medical Aid Credits
John, 59 years of age, earns R650 000, has 7 members – himself, wife and kids. He is self-employed
and does not belong to a medical aid at all! One of the children are disabled.
He contributes R1000 to a pension fund, R3500 to a Retirement Annuity, Donated R800 to the
SPCA, earns rental income of R45 000 and incurred rental expenses of R5000.
He incurred medical expenses of R74 000 and made a capital gain of R30 000. Calculate the
medical credits applicable if taxable income was R 350 000.
Example 13 - Medical credits
Tammy earns R 650 000, is 68 years old and has 7 members (herself, husband and kids).
She is self employed, but does not belong to a medical aid.
She contributes R 1 800 to a retirement annuity, earns rental income after expenses of R40 000.
She incurred medical expenses of R60 000 . She made a taxable gain of R30 000.
Calculate the medical credits assuming taxable income is R 250 000.
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Example 14 Medical deductions
Chris earns R650 000, he is 66 years of age, has 7 members – himself, wife and kids.
His company contributed 50% of his total contributions - total contributions are R 64 000.
Chris contributes R 3 500 to a retirement annuity, 7.5% of his earnings to a pension fund.
He incurred medical expenses not refunded (out of pocket expenses) of R40 000 and made
A capital gain of R30 000.
Calculate the medical credits.
Example 15 – Medical credits
Vanessa is 36 years old and earns R 350 000. She has only herself and husband on a medical aid which
totals to R 56 000 annually. Her employer contributes an amount of R 30 000 on her behalf (of the R56
000). She earns no other income but, contributes 7.5% of her salary to a provident fund.
She incurred out of pocket expenses in the same year of assessment of R 49 000.
Calculate the medical credits allowed.
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Example 16 – Comprehensive examples
Mr Mabena lives in Johannesburg. He is 24 years old and is a salesman for IBM. He sells computers &
earns commissions. He does not receive a salary, all commission based. For the tax year ended February
2015 he earned the following amounts:
 Commissions
R320 000
 Dividends listed on the JSE
R 6 200
For the same tax year he incurred the following Expenses:
 Telephone expenses in contacting customers:
R8 340
 Petrol Expenses:
R18 000
 Interest on loan from Nedbank:
R3 520
 (He obtained this loan in order to purchase JSE shares
 as a long-term investment & earns dividends )
 Restaurant expenses in entertaining potential customers: R6 300
He uses his own car to visit potential and actual customers. He purchased the vehicle at the beginning
of the tax year for an amount of R220 000 including VAT.
Based on the above information, you are required to calculate Ms Yusuf’s taxable income
for the tax year ended 28 February 2015
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Example 17 – Comprehensive examples
Mr and Mrs Wetlevrede are married in of community of property. He is 60 years old and employed by
Afrox Ltd as an accountant. She is 59 years old and carries on a very successful business in her own
name manufacturing outdoor furniture – not a small or micro business registered. They provide the
following information:
Mr Weltevrede
 Salary:
R224 000
 Taxable fringe benefits:
R16 000
 Interest Income:
R4 800
 Pension Fund contributions
R16 800
 Retirement annuity contributions
R4 800
Mrs Weltevrede:
 Gross turnover(excl VAT) from trade:
 Tax deductible expenditure incurred in
Connection with that trade:
 Income from dividends:
 Retirement annuity contributions:
R300 000
R60 000
R1 600
R6 000
Based on the above information, you are required to calculate the Welteverde’s taxable incomes for the
2015 tax year of assessment.
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Example 18 – Comprehensive Examples
Mrs Taxpayer is 60 years old & married in community of property. She receives the following income:
 Pension:
R250 000
 Dividends(from a South African source)
R20 000
 Interest(from a foreign source)
R 3 800
 Interest(from South African source)
R 40 000

She incurred the following expenses:
 Contributions to medical aid for her & her husband:
R18 000
 Other medical expenses
R 4 500
 Donated to the SPCA, a public Benefit organization
R 5 000

Calculate the tax payable by Mrs Tax Payer’s for the 2014/2015 year of assessment
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Example 19
Choose correct option and motivate!
1. Which 1 of the following statements regarding ‘gross income’ is true:
A.
capital receipts are never taxable
B.
The salary a sole trader pays himself for running his sole-trader business forms part of
his gross income.
C.
All physical receipts received by a taxpayer that are not of a capital nature will be
included in the recipient’s GI
D.
The pre -ample to the so-called special inclusions to the definition of ‘GI’ results in an
amount that is of a capital nature being included in gross income.
November 2011 exam paper
THAT IS IT FOR NOW!!! HOPE YOU ENJOYED….DON’T GIVE UP YET!!!!
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