QUESTION 1 (50 marks)

Thalita is a 57-year-old South African resident who works as an architect at Big Drawings Limited (‘Big Drawings’), a South African company situated in Johannesburg. The following information pertains to Thalita’s 2024 year of assessment:

1. She earned a monthly salary of R65 000 per month from Big Drawings for the period

1 March 2023 to 30 November 2023. Thalita resigned on 30 November 2023 from Big Drawings after 25 years of service.

2. Thalita contributed R110 000 in total to Big Drawings’ pension fund (a fund established under the Pension Funds Act of 1956) for the period she was employed by Big Drawings during the 2024 year of assessment. Big Drawings contributed the same amount on behalf of Thalita to the pension fund. Assume that Thalita’s remuneration amounts to R732 000 for the 2024 year of assessment.

3. Thalita received a payment of R360 000 from Big Drawings on 30 November 2023 in exchange for undertaking not to work at another architectural firm in the Johannesburg area within a period of five years.

4. Thalita borrowed R320 000 from Big Drawings on 1 August 2023 until 30 September 2023 to buy a new motor vehicle at an interest rate of 4.5% per annum. The interest is payable to Big Drawings on the last day of each month and accrues daily. The loan was repaid to Big Drawings on 30 September 2023 at the end of the business day. The official rate of interest for the relevant period was 5.75%.

5. Thalita used a set of six chairs owned by Big Drawings for private purposes at her home from 1 March 2023 to 31 July 2023. Big Drawings purchased these chairs on 1 January 2023 at R6 000 per chair. The total market value of these chairs was R30 000 on 1 March 2023.

6. On 30 November 2023, Big Drawings bought a new Rolex watch for Thalita as a reward for her years of faithful service to the firm. The cost price of the watch was R75 000 and the market value was R80 000 on 30 November 2023.

7. Thalita signed an employment contract with Sketches (Pty) Ltd on 30 November 2023 to start working for them on 1 December 2023 in Johannesburg, Gauteng. Unfortunately, the employment contract could not be fulfilled by Sketches (Pty) Ltd and Big Drawings already employed someone else in Thalita’s position from 1 December 2023. Therefore, Thalita claimed and received R16 520 per month from the Unemployment Insurance Fund for the period 1 December 2023 to 29 February
2024.

8. Thalita received the following interest amounts during the 2024 year of assessment:

• R24 000 on a fixed deposit at a bank in South Africa.

• R11 000 from a Momentum Investment that qualifies as a tax-free investment in terms of section 12T(1) of the Income Tax Act.

9. Big Drawings withheld employees’ tax amounting to R283 645 from Thalita’s salary during the 2024 year of assessment, which they paid over to the South African Revenue Service.

REQUIRED:

1.1) Calculate Thalita’s normal tax payable/(refundable) for the 2024 year of assessment. Show all calculations and round all answers to the nearest rand. Please provide a reason should an amount not be included. (46 marks)

1.2) Thalita wants to donate R10 000 to Happy Pets, an animal shelter. Happy Pets is not a registered public benefit organisation. According to Thalita, she is allowed to subtract the R10 000 donation from her taxable income. Briefly advise Thalita whether she is correct or not in terms of the Income Tax Act. (4 marks)

QUESTION 2 (32 marks)

Justin is a 54-year-old South African resident. He is employed by Fisheries (Pty) Ltd (‘Fisheries’), a South African company that carries on business in Durban. The following information relates to Justin’s tax affairs for the year of assessment ended 29 February 2024:

In terms of his employment contract, Justin receives the following remuneration:

• A monthly cash salary of R29 000.

• Justin has unrestricted use of a company car. Fisheries paid R195 000 (excluding VAT) for the car and carried all the fuel and maintenance costs of the car. The car has no maintenance plan and Justin has not kept any records of kilometres travelled.
• Justin lives in a flat that Fisheries owns. In 2010, Fisheries bought a block of flats near its place of business with the view to offering employees residential accommodation as part of their remuneration package. It is both customary and necessary to provide such accommodation. The total costs borne by Fisheries in respect of Justin’s flat, for the 2024 year of assessment, are:

Insurance R650

Water and electricity R9 600

Portion of the bond interest R12 000

Rates R760

The one-bedroomed flat is supplied to Justin unfurnished. Justin’s remuneration proxy for the 2024 year of assessment is R255 000. Justin has no interest in Fisheries.

Additional information:

In December 2022, Justin received his 2022 assessment, which reflected a taxable income of R335 000. His 2023 assessment, which is dated October 2023, reflects a taxable income R385 000.
REQUIRED:

2.1) Calculate the employees’ tax that must be withheld from the monthly remuneration that Justin receives from Fisheries (Pty) Ltd for the 2024 year of assessment.
Show all calculations and round all answers to the nearest rand. (18 marks)

2.2) Calculate Justin’s first and second provisional tax payments for the 2024 year of assessment. You may assume that Justin estimated his taxable income as R365 000 for his second provisional tax payment.
Show all calculations and round all answers to the nearest rand. (13 marks)

2.3) State the date by which Justin must make the third 2024 provisional (top-up) payment to avoid any penalties and interest. (1 mark)

QUESTION 3 (6 marks)

Butcher (Pty) Ltd (‘Butcher’) is a South African company with a 31 January year-end. Butcher’s accountant submitted their annual tax return on 1 May 2023 via the South African Revenue Services (‘SARS’) e-filing website and received their 2023 annual income tax assessment from SARS on 15 May 2023. Butcher’s accountant doesn’t agree with the amount owed to SARS. Butcher has objected to the income tax assessment on the SARS e-filing website and refuses to pay the tax liability in respect of the assessment until the dispute with SARS has been resolved.

REQUIRED:

Discuss whether or not Butcher (Pty) Ltd may legally withhold payment of their tax liability in terms of the Tax Administration Act 28 of 2011 with regards to the annual income tax assessment received from SARS on 15 May 2023.
Support your answer with section references to the Tax Administration Act 28 of 2011. (5 marks)

QUESTION 4 (12 marks)

Rohana is a 41-year-old South African resident who enjoys online gambling. She decided to quit her corporate job in the 2023 year of assessment to pursue gambling full-time and considers herself to be a professional gambler. According to Rohana she does not have to declare the gambling winnings of R450 000 which she made during the 2024 year of assessment on her tax return.

REQUIRED:

Advise Rohana on whether she should declare her gambling winnings of R450 000 on her tax return of the 2024 year of assessment. (11 marks)

Answers to Above Questions on Taxation of Individuals

Answer 1: The calculation of Thalita’s normal tax payable/(refundable) for the 2024 year of assessment is performed as follows:

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