TAX3702 ASSIGNMENT 5
QUESTION 1
(a) Calculation of Jochim's taxable income for his 2022 year of assessment
Payment to keep quiet - in connection with knowledge 200 000
Leave due - payment in respect of employment 27 000
No notice payment - connected to employment 90 000
Restraint of trade payment 157 000
Salary (23 000 x 3 + 28 000 x 7) 69 000
Bonus (30 000 x 3/12) 7 500
Employer pension fund contributions (23 000 x 3 x 10%) 6 900
Employer medical scheme contributions (4 035 x 3) 12 105
Local interest 24 000
Foreign dividends 8 887
South African dividends 2 000
Employer donation (100 x 3) 300
Covied 19 vaccinations - not a taxable benefit as it was provided to employees in
general at their place of work -
Low-interest loan :[50 000 x (4,5% - 2%) x 122/365 + (50 000 - 50 000/4) x (4,75% -
2%) x 62/365 + (50 000 - 50 000/4) x (5% - 2%) x 28/365] 3 471
Travel allowance (5 000 x 7) 35 000
Total kilometres = 103 445 - 88 674) = 14 771
Business kilometres = 2 900
Private travel = 14 771 - 2 900 = 11 871
Cost of vehicle = R220 000
Fixed cost from table = R75 039
Deemed costs
Fixed cost per km (75 039/14 771 x 212/365) 2,951
Maintenance cost 0,532
Fuel cost 1,263
Deemed cost per km 4,746
Actual costs
Wear and tear (220 000/7 x 212/365) 18 254
Finance charges 14 875
Registration cost 3 200
Licence fee 846
Fuel 37 175
, Actual cost per km (37 175/14 771) 2,517
Deemed cost is higher, therefore use deemed cost
Business travel (2 900 x 4,746) (13 763) 21 237
unemployment insurance benefits - accrued in current year (6 638 x 2) 13 276
Income protection policy (10 000 x 2) 20 000
Gross income 662 676
Less: exempt income (44 013)
South african interest exemption (23 800)
Foreign dividend exemption (8 887 x 25/45) (4 937)
South african dividends (2 000)
Unemployment insurance benefit (13 276)
618 663
Allowable deductions
Contributions to income protection policy - prohibited deduction -
Less: Pension and retirement annuity fund contributions
Employee pension fund contributions (23 000 x 3 x 7,5%) 5 175
Employee retirement annuity fund contributions 13 790
Employer pension fund contributions (23 000 x 3 x 10%) 6 900
Total contributions 25 865
Percentage limit - greater of:
- Remuneration: 27,5% x 450 000 = R123 750
- Taxable income: 27,5% x 618 663 = R170 132
Deduction limited to the lesser of:
R350 000 or
Percentage limit (R170 132) or
Taxable income (R615 192), thus deduct actual (25 865)
592 798
Less: Donations - R 3 x 100 = R300 limited to (589 327 x 10% = 58 933), therefore
allow in full (300)
Taxable income 592 498
b) Advise Jochim on the normal tax implications of the transfer to his tax free
savings account and the subsequent use of this account for medical expenses.
The annual tax-free portion of contributions to a tax-free investment is limited to
R36 000
The excess contributions Jochim made of R64 000 (being R100 000 - 36000) will be
subject to normal tax at 40%
The payment of medical expenses from a tax free investment will be regarded as a
withdrawal from the tax-free investment.
There are no income tax implications for withdrawals from tax free investments and
therefore no tax implications for the payment of medical expenses from the tax-free
investment
QUESTION 1
(a) Calculation of Jochim's taxable income for his 2022 year of assessment
Payment to keep quiet - in connection with knowledge 200 000
Leave due - payment in respect of employment 27 000
No notice payment - connected to employment 90 000
Restraint of trade payment 157 000
Salary (23 000 x 3 + 28 000 x 7) 69 000
Bonus (30 000 x 3/12) 7 500
Employer pension fund contributions (23 000 x 3 x 10%) 6 900
Employer medical scheme contributions (4 035 x 3) 12 105
Local interest 24 000
Foreign dividends 8 887
South African dividends 2 000
Employer donation (100 x 3) 300
Covied 19 vaccinations - not a taxable benefit as it was provided to employees in
general at their place of work -
Low-interest loan :[50 000 x (4,5% - 2%) x 122/365 + (50 000 - 50 000/4) x (4,75% -
2%) x 62/365 + (50 000 - 50 000/4) x (5% - 2%) x 28/365] 3 471
Travel allowance (5 000 x 7) 35 000
Total kilometres = 103 445 - 88 674) = 14 771
Business kilometres = 2 900
Private travel = 14 771 - 2 900 = 11 871
Cost of vehicle = R220 000
Fixed cost from table = R75 039
Deemed costs
Fixed cost per km (75 039/14 771 x 212/365) 2,951
Maintenance cost 0,532
Fuel cost 1,263
Deemed cost per km 4,746
Actual costs
Wear and tear (220 000/7 x 212/365) 18 254
Finance charges 14 875
Registration cost 3 200
Licence fee 846
Fuel 37 175
, Actual cost per km (37 175/14 771) 2,517
Deemed cost is higher, therefore use deemed cost
Business travel (2 900 x 4,746) (13 763) 21 237
unemployment insurance benefits - accrued in current year (6 638 x 2) 13 276
Income protection policy (10 000 x 2) 20 000
Gross income 662 676
Less: exempt income (44 013)
South african interest exemption (23 800)
Foreign dividend exemption (8 887 x 25/45) (4 937)
South african dividends (2 000)
Unemployment insurance benefit (13 276)
618 663
Allowable deductions
Contributions to income protection policy - prohibited deduction -
Less: Pension and retirement annuity fund contributions
Employee pension fund contributions (23 000 x 3 x 7,5%) 5 175
Employee retirement annuity fund contributions 13 790
Employer pension fund contributions (23 000 x 3 x 10%) 6 900
Total contributions 25 865
Percentage limit - greater of:
- Remuneration: 27,5% x 450 000 = R123 750
- Taxable income: 27,5% x 618 663 = R170 132
Deduction limited to the lesser of:
R350 000 or
Percentage limit (R170 132) or
Taxable income (R615 192), thus deduct actual (25 865)
592 798
Less: Donations - R 3 x 100 = R300 limited to (589 327 x 10% = 58 933), therefore
allow in full (300)
Taxable income 592 498
b) Advise Jochim on the normal tax implications of the transfer to his tax free
savings account and the subsequent use of this account for medical expenses.
The annual tax-free portion of contributions to a tax-free investment is limited to
R36 000
The excess contributions Jochim made of R64 000 (being R100 000 - 36000) will be
subject to normal tax at 40%
The payment of medical expenses from a tax free investment will be regarded as a
withdrawal from the tax-free investment.
There are no income tax implications for withdrawals from tax free investments and
therefore no tax implications for the payment of medical expenses from the tax-free
investment
