QUESTION 1 (41 marks)

Nadia Botha is a 42-year-old South African resident. Nadia is employed by Brand Sculpt (Pty) Ltd and received the following amounts during her 2024 year of assessment:

• Cash salary of R500 000.

• Nadia owns a flat that she rents out at a monthly rental of R10 000. The lease contract was concluded on 1 June 2023. As part of the lease contract, leasehold improvements of R20 000 must be affected on an annual basis. The current lessee only spent R15 000 on leasehold improvements during the 2024 year of assessment.
• Nadia was awarded a lump sum of R40 000 in December 2023 for exceptional services rendered to Brand Sculpt (Pty) Ltd.
• Nadia’s other interest is writing and she published her first book in 2020. She received R38 000 worth of royalties for this book during the 2024 year.
• Interest earned of R7 000 due to an overpayment made to SARS. The amount was paid to Nadia on 20 February 2024.
• Interest earned on a tax-free investment of R 10 000.

• Nadia sold her holiday home for R2 300 000 on 30 August 2023.

• Casino winnings of R20 000, which Nadia won during a spontaneous gambling session for entertainment while on vacation.
• Dividends of R15 000 received for shares held in a South African company.

• Nadia’s mother passed away and she inherited R2 000 000 from her on 1

January 2024.

• Nadia receives a monthly annuity to the value of R20 000. The capital portion of the annuity amounts to R5 000 per month.
• Nadia received an allowance of R5 000 from Brand Sculpt (pty) Ltd in relation to a uniform that she is required to wear to work on a daily basis.
• Nadia received an amount of R30 000 from Brand Sculpt (Pty) Ltd for payment towards her daughter’s school fees. Her daughter will be completing Grade 11 in 2024. Nadia’s remuneration proxy for the 2024 year of assessment is less than R600 000.

• Nadia received a fringe benefit in the form of the use of a company car. The value of the benefit amounted to R25 000 for the 2024 year. Per the 7th Schedule the cash equivalent of this benefit is R18 000.

REQUIRED:

1.1 Calculate Nadia’s taxable income for the 2024 year of assessment.

Include the applicable section of the Income Tax Act as part of your answer and show all calculations.
If an amount is excluded, state this fact and provide a brief reason for your answer. (35 marks)

1.2 Assume that Nadia had a taxable income of R896 000 for the 2024 year of assessment. Calculate Nadia’s total tax payable for the 2024 year of assessment. Round all answers to the nearest Rand. (6 marks

QUESTION 2 (16 marks)

Answer the following short questions:

2.1 Name and discuss two principles of a good tax system. (4 marks)

2.2 Identify the difference between direct and indirect taxes and provide two examples of direct tax and two examples of indirect taxes. (6 marks)

2.3 When referring to persons other than a natural person – identify how you would determine whether such a person is a resident or not. (2 marks)

2.4 Assume the following for Marvin’s 2024 year of assessment: Income R1 000 000
Taxable income R800 000

Tax liability R228 677

Calculate Marvin’s statutory – and effective tax rates based on the assumptions above. Round all answers to the nearest percentage. (4 marks)

QUESTION 3 (21 marks)

Samuel (50 years old) has never been an ordinary resident for South African income tax purposes. Samuel lives in Germany. He follows a yearly routine as the German winter sets in, he embarks on a journey to Cape Town, South Africa, in search of warm weather. His annual stay in Cape Town extends from 1 October each year until the end of February in the following year. Samuel has faithfully repeated this pattern sincec2010.

Samuel also received local interest of R150 000 from a bank in South Africa. The local interest accrued to him on the last day of February 2024.

REQUIRED:

3.1 Discuss whether Samuel qualifies as a resident of South Africa for the 2024 year of assessment in terms of the requirements of the physical presence test according to the Income Tax Act.

In your answer, remember to first state the requirements of the physical presence test, whereafter, you apply the facts in the scenario to the requirements of the physical presence test. (16 marks)

3.2 Discuss if Samuel can enjoy the section 10(1)(h) interest exemption on the local interest earned. (5 marks)

QUESTION 4 (12 marks)

Tammy (70 years old) is not a resident of South Africa. She had the following receipts for the 2024 year of assessment:
• An annual pension to the equivalent of R280 000 from the country (which is

England) that she is a resident of.

• She received a rental income of R10 500 per month for the full year of assessment from a flat she owns in Cape Town. She lets the flat to tenants at a market-related rental.
• Total interest of R120 000 for the year was received on a fixed deposit with a

South African bank (this is not from a tax-free investment).

• She received a dividend of R42 000 from her investment in a local South African company.
• An annuity to the equivalent of R180 000 from her former employer due to the

40 years of employment that she had with the company. None of these years were spent in South Africa.

REQUIRED:

Calculate Tammy’s taxable income for the 2024 year of assessment.

Include the applicable section of the Income Tax Act as part of your answer and show all calculations.
If an amount is excluded, state this fact and provide a brief reason for your answer. (12 marks)

QUESTION 5 (10 marks)

The two scenarios are independent:

Maintenance

During the 2023 year of assessment, Rose and Daniel Swift, went through a divorce. The court granted Rose custody of their daughter. During the 2024 year of assessment, Rose received monthly payments of R2 000 from Daniel for the maintenance of their daughter.

Uniform

Alex Anderson works as a chef at Gourmet Delights Restaurant. He is employed as a cook specialising in fine dining cuisine. As part of his job, he is required to wear a chef’s uniform consisting of a white chef’s coat and black pants. In the 2024 year of assessment, Gourmet Delights Restaurant provided him with three sets of uniforms, which amounted to a total cost of R7 000.

REQUIRED:

5.1 With reference to the information under Maintenance, discuss whether the amounts received by Rose are exempt from normal tax or not. Support your answer with reasons, specifically addressing sections of the Income Tax Act. (5 marks)

5.2 With reference to the information under Uniform, discuss whether the benefit received by Alex are exempt from normal tax or not. Clearly state your reason(s). (5 marks)

Remember to clearly identify the relevant sections of the Income Tax Act applicable to the scenario, then provide the requirements of the Income Tax Act, whereafter you apply the Income Tax Act requirements to the facts of the scenario.
No calculations are required.

Answers to Above Questions on Taxation

Answer 1: The taxable income of Nadia for the 2024 year of assessment is calculated as follows:

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