QUESTION 1 (62 marks)

Grace, a 64-year-old South African resident, has been a full-time employee at Stellar Enterprises (‘Stellar’) since 1999. Stellar is a major player in the financial services sector. The following information relates to Grace’s 2024 year of assessment:

1. Employment income: Grace earned a salary of R50 000 per month.

2. Bonus: She received an annual performance bonus of R50 000.

3. Long service award: Grace received a long service award of R25 000 from

Stellar in recognition of her 25 years of unbroken dedicated service.

4. Restraint of trade: Grace’s employment contract with Stellar specifies that she cannot start a financial advisory business or work part-time for a competing firm. Her employer has paid her R200 000 for the restraint of trade.
5. Pension contributions: Stellar and Grace each contributed 3.5% of her salary to the pension fund monthly up until the day she retired. Grace, who decided to retire on 31 December 2023 received the following lump sum payments:
o Pension fund lump sum: R750 000

o Monthly annuity (from 1 January 2024): R15 000

6. Leave pay: Grace received R15 000 for her unused leave days.
7. Medical expenses: Grace is the primary member of the HealthPlus Medical Scheme and is the sole member of her medical aid plan. During the 2024 year of assessment, Grace contributed R2 300 per month, while her employer, Stellar, contributed R2 200 per month on her behalf. Grace incurred qualifying medical expenses totalling R50 000, with R10 000 reimbursed by the medical aid. After retiring, Grace continued her contributions, paying the full amount of R4 500 per month from 1 January 2024.
8. Capital gain: Grace sold a piece of property, realising a taxable capital gain of R100 000.

9. Interest income: She earned R5 000 in interest from her savings account with a local South African bank.
10.Accommodation: Stellar provided Grace with temporary residential accommodation in Gauteng from 1 September 2023 to 30 September 2023 for the time she had to be in Rosebank, Johannesburg to attend conferences on behalf of Stellar. Stellar rented a furnished 4-bedroom apartment for Linda at a cost of R30 000 for the month. Stellar also covered the electricity expense of R2 000. Grace’s remuneration proxy for the 2024 year of assessment is R600000.

11.Maintenance payment: During the 2023 year of assessment, Grace’s husband filed for divorce, resulting in a maintenance order requiring his retirement fund to pay Grace a monthly maintenance of R6 000.
12.Donation: On 1 February 2024, Grace donated R27 000 to the Hope

Foundation, a qualifying Section 18A Public Benefit Organisation.

Stellar paid employees tax amounting to R200 000 during the 2024 year of assessment.

REQUIRED:

1.1 Calculate Grace’s taxable income for the 2024 year of assessment as per the appropriate tax framework applicable to natural persons.
• Include the applicable section of the Income Tax Act as part of your answer and show all calculations.
• Round to the nearest Rand, where applicable.
• If an amount is excluded, state this fact and provide a brief reason for your answer.(40 marks)

1.2 Calculate Grace’s tax liability for the 2024 year of assessment.

Assume that the taxable income is as follows:

• R750 000 for Retirement fund lump sum benefits (RFLB) – column 1

• R900 484 for other Income and deductions – column 3

(22 marks)

QUESTION 2 (23 marks)

Liam is a 26-year-old South African resident. Liam is employed by Green Solutions (Pty) Ltd and has been with the company since 1 February 2020.

Green Solutions (Pty) Ltd provided you with the following information to calculate Liam’s employees’ tax liability for February 2024:

• He received a monthly salary of R40 000.

• He was granted a loan of R35 000 on 1 December 2023. The loan bears interest at 5% per annum and is repayable on 30 November 2024. (Assume an official interest rate of 8%.)
• He received a travel allowance of R12 000 per month from 1 February 2024.

Liam used his own vehicle, purchased for R300 000 (excluding VAT) in December 2023. He travelled 2 500 km in total, with 1 800 km recorded for business purposes during the month of February 2024 but did not keep accurate records of costs incurred. Liam does keep an accurate logbook of private and business travel.

REQUIRED:

Calculate Liam’s employee’s tax liability for February 2024 that Green Solutions (Pty) Ltd would need to withhold from his salary. Round all answers to the nearest Rand. (23 marks)

QUESTION 3 (15 marks)

You are a consultant at a tax advisory firm, assisting clients with various tax matters, including personal income tax calculations, submission of income tax returns, provisional tax calculations, and their submissions.

The following information relates to one of your clients:

Anna is a 58-year-old South African resident and a provisional taxpayer.
Anna provided you with the following information for her 2024 year of assessment: Estimated taxable income R850 000

First provisional tax payment R120 000

Second provisional tax payment R40 000

Monthly employees’ tax deduction R8 000

REQUIRED:

Assume that Anna’s final assessment shows a taxable income of R1 000 000 for the 2024 year of assessment. Her basic amount was R950 000.

Discuss and include calculations, where applicable, if Anna will be liable to pay any penalties with regard to her second provisional tax payment.
• Remember to first state the relevant requirements of the Fourth Schedule to the Income Tax Act, whereafter you apply the requirements to the facts of the scenario.
• Support your answer with references to the Income Tax Act and show all calculations. (15 marks)

Answers to Above Questions on Taxation

Answer 1: Grace’s taxable income for the 2024 year of assessment as per the appropriate tax framework applicable to natural persons is calculated as follows:

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