TAX3702
Learning unit 2
Gross income (residents) and special inclusions
, 2.1 Background
2.2 Gross income
2.3 Resident of the Republic test
2.4 Total amount in cash or otherwise
2.5 Received by or accrued to
Contents of
2.6 Year or period of assessment
2.7 Receipts or accruals of a capital nature
learning unit
2.8 Special inclusions in gross income: introduction
2.8.1 Annuities
2.8.2 Alimony, allowances or maintenance
2.8.3 Amounts received in respect of services rendered, employment or
holding an office
2.8.4 Retirement fund lump sum benefits or retirement fund lump sum
withdrawal benefits
2.8.5 “Know-how” payments
2.8.6 Dividends
2.8.7 Other amounts included in gross income
,Learning After working through this learning unit, you should be able to:
outcomes state the requirements of gross income for residents
determine whether an amount has to be included in gross income
after analysing each component of the gross income definition
calculate a person’s gross income
determine whether a person is a resident of the Republic as a
result of being ordinarily resident or because they comply with the
physical presence test
determine why certain types of income do not meet the
requirements of the general definition of “gross income” but are
nevertheless specially included in gross income
determine which amounts fall within the ambit of “received in
respect of services rendered, employment or holding an office”
list all the categories of receipts and accruals that are specially
included in gross income
demonstrate your ability to discuss whether a particular receipt or
accrual should be specially included in gross income, even if it does
not meet the “not of a capital nature” requirement of the general
definition
, Critical questions
When a person deals with the concept gross income, the following questions arise:
• What is meant by gross income?
• Does the definition of gross income apply to all persons whether they reside in South Africa or not?
• When is an amount included in gross income?
• Can the taxpayer decide when such an amount may be included?
• What if an amount does not fall within the definition of gross income?
• Which amounts are specifically included in gross income?
,Introduction
,2.1 Background
,2.1 Background
In the Taxable Income Framework (see additional resources for a
copy)
• the starting point on how to calculate an individual’s taxable
income and tax liability is Gross income.
• The general framework for calculating taxable income and tax
liability starts with “gross income”.
• If an amount does not fall into gross income, it cannot be taxed
(apart from taxable capital gains that are included directly in
taxable income).
• As a result, it is crucial to know and understand the definition
of “gross income”, in order to determine whether an amount
meets the requirements of that definition.
,2.1
Background
,2.2 Gross income
, Gross income definition, in the case of a resident:
• the total amount,
• in cash or otherwise,
• received by or accrued to or in favour of such resident,
• during such year or period of assessment,
2.2 Gross • excluding receipts or accruals of a capital nature.
income
There are two parts to the definition of gross income:
1. The first deals with “residents”.
2. The second deals with “non-residents” (this is discussed in learning unit 8).
You need to determine whether an individual is a resident or not because
• residents are taxed on their worldwide income while
• non-residents are only taxed on income received from a South African source – see learning
unit 8
Learning unit 2
Gross income (residents) and special inclusions
, 2.1 Background
2.2 Gross income
2.3 Resident of the Republic test
2.4 Total amount in cash or otherwise
2.5 Received by or accrued to
Contents of
2.6 Year or period of assessment
2.7 Receipts or accruals of a capital nature
learning unit
2.8 Special inclusions in gross income: introduction
2.8.1 Annuities
2.8.2 Alimony, allowances or maintenance
2.8.3 Amounts received in respect of services rendered, employment or
holding an office
2.8.4 Retirement fund lump sum benefits or retirement fund lump sum
withdrawal benefits
2.8.5 “Know-how” payments
2.8.6 Dividends
2.8.7 Other amounts included in gross income
,Learning After working through this learning unit, you should be able to:
outcomes state the requirements of gross income for residents
determine whether an amount has to be included in gross income
after analysing each component of the gross income definition
calculate a person’s gross income
determine whether a person is a resident of the Republic as a
result of being ordinarily resident or because they comply with the
physical presence test
determine why certain types of income do not meet the
requirements of the general definition of “gross income” but are
nevertheless specially included in gross income
determine which amounts fall within the ambit of “received in
respect of services rendered, employment or holding an office”
list all the categories of receipts and accruals that are specially
included in gross income
demonstrate your ability to discuss whether a particular receipt or
accrual should be specially included in gross income, even if it does
not meet the “not of a capital nature” requirement of the general
definition
, Critical questions
When a person deals with the concept gross income, the following questions arise:
• What is meant by gross income?
• Does the definition of gross income apply to all persons whether they reside in South Africa or not?
• When is an amount included in gross income?
• Can the taxpayer decide when such an amount may be included?
• What if an amount does not fall within the definition of gross income?
• Which amounts are specifically included in gross income?
,Introduction
,2.1 Background
,2.1 Background
In the Taxable Income Framework (see additional resources for a
copy)
• the starting point on how to calculate an individual’s taxable
income and tax liability is Gross income.
• The general framework for calculating taxable income and tax
liability starts with “gross income”.
• If an amount does not fall into gross income, it cannot be taxed
(apart from taxable capital gains that are included directly in
taxable income).
• As a result, it is crucial to know and understand the definition
of “gross income”, in order to determine whether an amount
meets the requirements of that definition.
,2.1
Background
,2.2 Gross income
, Gross income definition, in the case of a resident:
• the total amount,
• in cash or otherwise,
• received by or accrued to or in favour of such resident,
• during such year or period of assessment,
2.2 Gross • excluding receipts or accruals of a capital nature.
income
There are two parts to the definition of gross income:
1. The first deals with “residents”.
2. The second deals with “non-residents” (this is discussed in learning unit 8).
You need to determine whether an individual is a resident or not because
• residents are taxed on their worldwide income while
• non-residents are only taxed on income received from a South African source – see learning
unit 8
