QUESTION 1 (23 marks)
Nkululeko (52 years old) is a South African resident. He works for Global Capital (Pty) Ltd as the financial manager and was employed for the full year of assessment.
The following information relates to Nkululeko’s 2023 year of assessment:
Use of laptop
On 1 November 2022, he was provided with the use of a new laptop. He is allowed to use the laptop both at the office and at home. Approximately 85% of the use was for business purposes. Global Capital (Pty) Ltd purchased the laptop for R12 000 on 15 October 2022.
Nkululeko made a monthly contribution of R4 500 to a medical aid scheme. Nkululeko’ wife and their minor daughter are dependants on his medical aid. Global Capital (Pty) Ltd contributed R3 000 per month to Nkululeko’s medical aid for the full year of assessment.
Nkululeko’s daughter is an avid soccer player, but unfortunately broke her toe during a school soccer match in January 2023 and had to undergo internal fixation surgery. Nkululeko’s medical aid did not cover the full amount due for the surgery and he had to pay R30 000 relating to the surgery. The hospital agreed that he can pay 50% of the outstanding amount by 28 February 2023 and the other 50% is due 31 March 2023.
Nkululeko had no other medical expenses that his medical aid did not cover for the 2023 year of assessment.
Assume Nkululeko had a taxable income (correctly calculated) of R652 000 for the 2023 year of assessment.
With reference to the information under Use of laptop, discuss the income tax consequences for Nkululeko’s 2023 year of assessment. Specifically, support your answer with references to the Seventh Schedule of the Income Tax Act.(8 marks)
With reference to the information under Medical aid, calculate ALL (medical and other) rebates that will be available to Nkululeko for the 2023 year of assessment.(15 marks)
QUESTION 2 (24 marks)
Sally (60 years old) is a South African resident. Sally has been working at All Trek (Pty) Ltd for the past 25 years and she retired on 31 December 2022.
All Trek (Pty) Ltd gave Sally a fancy coffee machine, as a token of appreciation for 25 years of service as they know how much she loves a good cup of coffee. All Trek (Pty) Ltd purchased the coffee machine for R15 000 in November 2022 and Sally was awarded the machine on her last day at All Trek (Pty) Ltd.
On her retirement on 31 December 2022, Sally received a lump sum from All Trek (Pty) Ltd of R450 000. (You can assume that this amount qualifies as a severance benefit.)
On the same date, Sally also received a retirement lump sum of R600 000 from her provident fund. She transferred 40% of the lump sum to her retirement annuity fund, and the remaining 60% will be paid out as a monthly annuity. R200 000 of her provident fund contributions made prior to 1 March 2016 were not allowed as a deduction. All contributions made after 1 March 2016 were deductible.
In July 2020, Sally received a lump sum of R350 000 when she withdrew from a retirement annuity fund. All the contributions made to the retirement annuity fund were deductible.
With reference to the information under the Coffee machine, discuss the income tax consequences for Sally’s 2023 year of assessment.
Support your answer with references to the Seventh Schedule of the Income Tax Act and calculations. (12 marks)
With reference to the information under Lump sums, calculate the income tax consequences for Sally’s 2023 year of assessment. (12 marks)
QUESTION 3 (43 marks)
You are a consultant at a tax consulting firm, and you assist your clients with various tax matters ranging from personal income tax calculations and submission of income tax returns, provisional tax calculations and the submission thereof.
The following information relating to two of your clients is available:
Ben (66 years old) is a South African resident and a provisional taxpayer.
Ben presented you with the following information relating to his 2023 year of assessment for you to assist with his second provisional tax calculation:
|Estimated taxable income||1 200 000|
|First provisional tax payment||150 000|
|Monthly employees’ tax deduction||10 000|
Michelle (26 years old) is a South African resident. Michelle is employed by Tire Trend (Pty) Ltd and has been in their employment since 1 February 2020.
Tire Trend (Pty) Ltd provided you with the following information to complete the calculation of Michelle’s employees’ tax liability for January 2023:
• She received a salary of R30 000.
• Pension fund contribution of 6% is deducted from her salary.
• She was granted a loan of R25 000 on 1 December 2022. The loan bears interest at 2% per annum and is repayable on 30 November 2023. (Assume an official interest rate of 7%.)
Calculate Ben’s (Client 1) second provisional tax payment based on his estimated taxable income for the 2023 year of assessment.(10 marks)
Assume that Ben’s (Client 1) final assessment shows a taxable income of R1 550 000 for the 2023 year of assessment.
Discuss, and include calculations where applicable, if Ben will be liable to pay any penalties with regard to his 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 Act and show all calculations.(13 marks)
Calculate Michelle’s (Client 2) employees tax liability for January 2023 that Tire Trend (Pty) Ltd would need to withhold from her salary. Round all answers to the nearest Rand. (20 marks)
QUESTION 4 (10 marks)
Siko (45 years old) is a South African resident. After inheriting a sizable amount of cash from his grandfather, Siko started speculating with Crypto assets as a hobby.
The following information relates to Siko’s 2023 year of assessment:
• He made a taxable income of R1 832 500.
• He made a loss made of R205 200 with his Crypto asset speculation.
Advise Siko whether he will be allowed to deduct the loss he made from his Crypto asset speculation from his taxable income for the 2023 financial year.
Support your answer with references to the Income Tax Act. (10 marks)
Answers on Above Questions on Taxation of Individuals
Answer 1: The income tax consequences for Nkululeko for the use of laptop in 2023 financial year by considering the seven schedule of the Income Tax Act in South Africa is calculated as follows:
It is important to determine the period for which the laptop was used for personal and business purposes in order to calculate the taxable fringe benefit as applicable. The given case scenario indicates that the usage period was from 1st November 2022 to 31st October 2023. Business usage is 85% which means approximately 10 months. The personal usage is therefore 2 months. The taxable fringe benefit is therefore:
Get completed answers on the questions above on taxation of individuals from the accounting assignment help experts of Student Life Saviour in South Africa.
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