TAX2601
EXAM PACK
,PRINCIPLES OF TAXATION - TAX2601
TAXATION OF BUSINESS ACTIVITIES
OCTOBER/NOVEMBER 2025
EXAM ANSWERS
QUESTION 1 (15 marks)
1. The following entities/persons may qualify as a micro business. Which is
incorrect?
Answer: b) Any natural person or trust
A trust is not one of the qualifying entities for the micro-business regime. Natural
persons, companies and close corporations may qualify subject to the other
requirements.
2. Which statement about turnover tax is correct?
Answer: a) Qualifying turnover refers to receipts only; not to amounts accrued.
Turnover tax operates on amounts actually received. Amounts that have accrued but
have not been received are excluded until received.
3. Which factor is NOT considered when determining whether a receipt is capital
in nature?
Answer: c) Taxpayer's state of mind
The relevant considerations include the taxpayer's intention, any change in intention
and objective evidence from the taxpayer's activities. "State of mind" is not treated as a
separate technical test.
,4. Which deduction is prohibited by section 23 although it may comply with
section 11(a)?
Answer: d) All of the above
Section 23 contains specific prohibitions, including expenditure relating to maintaining a
taxpayer, expenditure recoverable under insurance and expenditure relating to exempt
income.
5. The third provisional tax payment, or top-up payment, is compulsory.
Answer: False
The third payment is voluntary. It is used mainly to reduce or avoid interest where the
first two provisional payments are insufficient.
6. South African dividends are generally fully exempt from normal tax, subject to
limited exceptions.
Answer: True
Domestic dividends are generally exempt from normal income tax, although dividends
tax may apply separately in appropriate circumstances.
7. Which scenario would be considered not of a capital nature?
Answer: c) A taxpayer who trades in fixed property sells three residential
properties.
The taxpayer is trading in property, meaning the properties are held as trading stock.
The proceeds therefore have a revenue rather than capital character.
A fortuitous prize, by contrast, will generally be capital in nature unless it is connected to
services or a business activity. The Tax Faculty notes that a fortuitous prize may be a
capital receipt where it was not designedly sought or earned.
, 8. Which requirement is found in both the gross-income definition and the
general deduction formula?
Answer: d) Not of a capital nature
The gross-income definition excludes receipts of a capital nature, while section 11(a)
generally permits deductions only where the expenditure or loss is not capital in nature.
9. Which scenario would not constitute carrying on a trade?
Answer: a) The taxpayer invests on the JSE Limited and earns dividends from
shares.
A passive investment in shares producing dividends does not, on these facts, constitute
the carrying on of a trade.
10. Residential-unit allowance statement
Answer: True
Where the relevant residential unit forms part of a building and was acquired without the
taxpayer erecting or constructing it, the prescribed deemed-cost percentage is
applicable. The stated 55% for acquisition and 30% for an improvement are
therefore correct for the rule being tested.
11. Gross income from the 500 cans
Total selling price:
\[ 500 \times R15=R7\,500 \]
The goods were delivered on 26 January 2025 and the amount had therefore accrued
to Beveragebox during the year of assessment. The fact that R5 000 was only received
in February does not prevent the amount from having accrued.
EXAM PACK
,PRINCIPLES OF TAXATION - TAX2601
TAXATION OF BUSINESS ACTIVITIES
OCTOBER/NOVEMBER 2025
EXAM ANSWERS
QUESTION 1 (15 marks)
1. The following entities/persons may qualify as a micro business. Which is
incorrect?
Answer: b) Any natural person or trust
A trust is not one of the qualifying entities for the micro-business regime. Natural
persons, companies and close corporations may qualify subject to the other
requirements.
2. Which statement about turnover tax is correct?
Answer: a) Qualifying turnover refers to receipts only; not to amounts accrued.
Turnover tax operates on amounts actually received. Amounts that have accrued but
have not been received are excluded until received.
3. Which factor is NOT considered when determining whether a receipt is capital
in nature?
Answer: c) Taxpayer's state of mind
The relevant considerations include the taxpayer's intention, any change in intention
and objective evidence from the taxpayer's activities. "State of mind" is not treated as a
separate technical test.
,4. Which deduction is prohibited by section 23 although it may comply with
section 11(a)?
Answer: d) All of the above
Section 23 contains specific prohibitions, including expenditure relating to maintaining a
taxpayer, expenditure recoverable under insurance and expenditure relating to exempt
income.
5. The third provisional tax payment, or top-up payment, is compulsory.
Answer: False
The third payment is voluntary. It is used mainly to reduce or avoid interest where the
first two provisional payments are insufficient.
6. South African dividends are generally fully exempt from normal tax, subject to
limited exceptions.
Answer: True
Domestic dividends are generally exempt from normal income tax, although dividends
tax may apply separately in appropriate circumstances.
7. Which scenario would be considered not of a capital nature?
Answer: c) A taxpayer who trades in fixed property sells three residential
properties.
The taxpayer is trading in property, meaning the properties are held as trading stock.
The proceeds therefore have a revenue rather than capital character.
A fortuitous prize, by contrast, will generally be capital in nature unless it is connected to
services or a business activity. The Tax Faculty notes that a fortuitous prize may be a
capital receipt where it was not designedly sought or earned.
, 8. Which requirement is found in both the gross-income definition and the
general deduction formula?
Answer: d) Not of a capital nature
The gross-income definition excludes receipts of a capital nature, while section 11(a)
generally permits deductions only where the expenditure or loss is not capital in nature.
9. Which scenario would not constitute carrying on a trade?
Answer: a) The taxpayer invests on the JSE Limited and earns dividends from
shares.
A passive investment in shares producing dividends does not, on these facts, constitute
the carrying on of a trade.
10. Residential-unit allowance statement
Answer: True
Where the relevant residential unit forms part of a building and was acquired without the
taxpayer erecting or constructing it, the prescribed deemed-cost percentage is
applicable. The stated 55% for acquisition and 30% for an improvement are
therefore correct for the rule being tested.
11. Gross income from the 500 cans
Total selling price:
\[ 500 \times R15=R7\,500 \]
The goods were delivered on 26 January 2025 and the amount had therefore accrued
to Beveragebox during the year of assessment. The fact that R5 000 was only received
in February does not prevent the amount from having accrued.
