QUESTION 1 (42 marks)

Mazu Mavuso is a 43-year-old South African resident who was employed by Veg & Fruit Limited, a South African company, until 30 November 2022. On 30 November 2022, Veg & Fruit Limited ceased its operations and the pension fund that Veg & Fruit Limited established for its employees also closed down.

The Veg & Fruit Limited pension fund paid out R80 000 to Mazu Mavuso during the 2023 year of assessment. All Mazu Mavuso’s pension fund contributions have been deducted in the determination of his taxable Income. Mazu Mavuso also decided to join a retirement annuity fund, to which he made a total contribution of R7 000 during the 2023 year of assessment.

For the 2023 year of assessment, Mazu Mavuzo’s receipts and expenses were as follow:
R
Salary 720 000
Director’s fees earned 110 000
Local dividends from South African companies 45 000
Local interest from a non ‘tax free investment’ 24 500
Pension fund contributions at 6.5% of his salary ?
Retirement annuity fund contributions 7 000
Qualifying medical expenses paid 61 630
Donation to a qualifying section 18A Public Benefit Organisation 6 000

REQUIRED:

Calculate Mazu Mavuso’s taxable income for the 2023 year of assessment. (25 marks)

Calculate Mazu Mavuso’s total normal tax liability for the 2023 year of assessment. Assume that Mazu Mavuso had a taxable income of:
• R770 900 before any retirement fund lump sum withdrawal benefits.
• R843 900 after any retirement fund lump sum withdrawal benefits. (17 marks)

QUESTION 2 (37 marks)

Megan is a 36-year-old South African resident who enjoys certain fringe benefits as part of her salary package. The details of these fringe benefits are as follow:

Accommodation:
Megan’s employer pays R114 000 per annum (this is considered to be an arm’s length transaction) to rent a house from a non-connected person. Megan paid R27 000 in total to live in this house which was rented from 1 June 2022. The house has three bedrooms, a kitchen, a bathroom and a lounge and is furnished. Megan pays for her own electricity and water. Megan earned R320 000 in the 2022 year of assessment, which is considered to be her remuneration proxy.

Use of a company car:
Megan received a travel allowance of R6 800 per month from her employer for the use of a vehicle for the 12 months of the 2023 year of assessment. The vehicle was purchased second-hand for R320 000 (including VAT). Megan used the vehicle for a total of 235 days during the 2023 year of assessment. She travelled a total of 24 700 km, and her logbook showed that 13 270 km were for private purposes. She did not keep accurate records of the costs she incurred.

REQUIRED:

With regards to the Accommodation, discuss the value of the fringe benefit which Megan will have to include in her taxable Income for the 2023 year of assessment.
Support your answer with references to the Seventh Schedule of the Income Tax Act and calculations. Round your answer to the nearest rand. (22 marks)

With regards to the Use of a company car, calculate the taxable amount of Megan’s travel allowance for the 2023 year of assessment. (15 marks)

QUESTION 3 (16 marks)

Isaac Mayat is a 38-year-old South African resident. The following provisional tax information relates to him:
• His taxable Income for the 2022 year of assessment was R1 190 000 and this amount is also reflected on his provisional tax form.
• His assessment was received on 1 August 2022.
• His taxable Income for the 2023 year of assessment was R950 000.
• He estimated his taxable Income at R710 000 for his second provisional tax payment but was required by the Commissioner to increase it to R870 000. He then timeously paid his second provisional tax payment on the increased taxable Income of R870 000 as required by the Commissioner.

REQUIRED:

Discuss if Isaac Mayat will be liable to pay any penalties with regard to his second provisional tax payment in terms of paragraphs 20 and 27 of the Fourth Schedule to the Income Tax Act. Support your answer with references to the Act.

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. (16 marks)

QUESTION 4 (5 marks)

Michelle is a 34-year-old South African resident who works as a labour broker. Eve is in Michelle’s service. Eve works as a receptionist for Desk (Pty) Ltd (one of Michelle’s clients) whenever Desk (Pty) Ltd informs Michelle that the company has suitable work for her. Desk (Pty) Ltd pays Michelle directly for the services. Michelle does not have an exemption certificate (IRP30).

The Tax Manager of Desk (Pty) Ltd is of opinion that he does not have to deduct employees tax from any payments made to Michelle because Michelle is responsible for her own employees’ employees tax.

REQUIRED:

Briefly advise the Tax Manager if you agree or disagree that Desk (Pty) Ltd does not have to deduct employees tax from the payments made to Michelle. (5 marks)

Answers to above questions on taxation

The calculation of Mazu Mavuso’s taxable income for the 2023 year of assessment is performed as follows:

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