Tax Notes
ALIXIA LE GRANGE
, Topic Act Section / Schedule Page(s)
Definitions, incl. “gross income”, “resident” s1 7–27, 28–35
Source of income s9 34–35
Special inclusions: annuities, employment, benefits Paragraphs (a)–(n) of 36–79
Gross Income
Exempt income: pensions, scholarships, interest s 10 – s 10C 80–101
General deduction formula s 11(a) 140–150
Specific deductions (e.g., legal fees, bad debts) s 11(b)–(w) 151–171
Wear and tear allowance s 11(e) 205–212
Retirement contributions s 11F 293–296
Annuity income s 11(k) 297–299
Learnership and training allowances s 11(nA), 11(nB) 258–261
Scrapping allowance s 11(o) 240–242
Manufacturing allowance s 12C 213–218
Small business corporations s 12E 219–222
Learnership allowance s 12H 258–261
Building allowances s 13, 13quin, 13sex 223–231
(commercial, residential, low-cost)
Donations to PBOs s 18A 304–309
Assessed losses s 20, 20A, 20B 102–110
Prohibited deductions s 23 195–204
Foreign exchange differences s 24I Not explicitly indexed,
may be embedded
Income timing and translation rules s 25, 25D Referenced in
admin/dispute section
Capital gains s 26A 111–139
CGT: disposal rules, inclusions, exclusions Eighth Schedule 111–139
General Anti-Avoidance Rules (GAAR) s 80A–80L (Part IIA) 310–315
Fringe benefits: company cars, housing, etc. Seventh Schedule 267–292
Employees’ tax (PAYE) Fourth Schedule Covered in admin/tax
computation examples
Returns, objections, assessments Tax Administration Act 316–325
(select refs)
Youth employment subsidy Employment Tax 262–266
Incentive Act
PAGE 1
,Taxation Revision Notes
Framework for Calculating Normal Income Tax
Description
The framework outlines the steps to calculate normal income tax, starting from gross income and
adjusting for inclusions, exemptions, deductions, and rebates to arrive at the normal tax payable.
Key Concepts
• Gross Income (s 1): The starting point of the calculation.
• Special Inclusions (s 1 GI): Amounts that are included in gross income, whether of a
capital nature or not.
• Exempt Income (s 10; S10a – 10C): Income specifically excluded from normal tax.
• Income (s 1): Gross income plus special inclusions less exempt income.
• Deductions and Allowances (ss 11-19, ss 21–24P): Expenses that can be deducted from
income (excluding s 11F & s 18A).
• Assessed Loss (ss 20 – 20B): Losses from previous years that can be used to reduce
taxable income.
• Amounts Included in Taxable Income (TI) (s 8(1)(a)): Specific items like travel
allowances.
• Taxable Capital Gain (s 26A): Capital gains that are subject to tax.
• Deduction s 11F: Deduction available only to individuals.
• Deduction ito s 18A: Donations to Public Benefit Organizations (PBOs).
• Taxable Income (s 1): The base amount on which tax is calculated.
• Tax per table: The amount of tax calculated based on taxable income, according to tax
tables.
• Rebates and Credits: Reductions in tax payable, such as provisional and employee's tax.
• Normal Tax Payable: The final amount of tax due after all adjustments.
PAGE 2
, Gross Income Definition (s 1)
Description
The definition of gross income is crucial for determining the starting point for income tax
calculation. It involves understanding what constitutes an 'amount,' what it means to be 'received
by or accrued to,' and what is 'not of a capital nature.'
Key Terms and Important Points
• Amount: Must be in cash or otherwise. It includes the value of every form of property
earned by the taxpayer, whether corporeal or incorporeal, as long as it has a money value
(Lategan case).
• Ascertainable Money Value: No amount is considered received or accrued if it does not
have an ascertainable money value at the time (Butcher Bros case).
• Quid Pro Quo: A right that cannot be transferred or actually turned into money can still
have a monetary value; objective test, not subjective (Brummeria Renaissance case).
• Received By: The earlier of when an amount is received or accrued to the taxpayer.
o The amount must be for the taxpayer's benefit to be included in Gross Income
(GI) (Geldenhuys case).
o An amount accepted with the intention to retain it for the taxpayer's own benefit
is considered 'received by' the taxpayer, even in the context of an illegal contract
(MP Finance Group CC case).
o The legal or illegal nature of a company does not determine whether its income
should be subject to tax (Delagoa Bay Cigarette Co case).
o Amounts received that might be refundable to customers are included in GI if
they are not 'trust moneys' (Pyott case).
• Accrued To: When a taxpayer acquires a right to amounts, even if paid in installments in
subsequent years, the present value of all amounts is included in GI in the current year
(Lategan case).
o The amount does not have to be due and payable; it accrues if a right to future
payments vests in the taxpayer (credit sales) (People’ Stores case).
o An amount accrues if a taxpayer becomes entitled to the proceeds, even if there's
a moral obligation to hand them over to a charity (PBO) (Witwatersrand
Association of Racing Clubs case).
o A right only accrues to the taxpayer when the conditions are fulfilled and the
right becomes exercisable – entitlement is unconditional (Mooi case).
• Not of a Capital Nature: This is determined by intention, scheme of profit-making,
mixed or dual intention, change of intention, and the nature of the asset.
PAGE 3
ALIXIA LE GRANGE
, Topic Act Section / Schedule Page(s)
Definitions, incl. “gross income”, “resident” s1 7–27, 28–35
Source of income s9 34–35
Special inclusions: annuities, employment, benefits Paragraphs (a)–(n) of 36–79
Gross Income
Exempt income: pensions, scholarships, interest s 10 – s 10C 80–101
General deduction formula s 11(a) 140–150
Specific deductions (e.g., legal fees, bad debts) s 11(b)–(w) 151–171
Wear and tear allowance s 11(e) 205–212
Retirement contributions s 11F 293–296
Annuity income s 11(k) 297–299
Learnership and training allowances s 11(nA), 11(nB) 258–261
Scrapping allowance s 11(o) 240–242
Manufacturing allowance s 12C 213–218
Small business corporations s 12E 219–222
Learnership allowance s 12H 258–261
Building allowances s 13, 13quin, 13sex 223–231
(commercial, residential, low-cost)
Donations to PBOs s 18A 304–309
Assessed losses s 20, 20A, 20B 102–110
Prohibited deductions s 23 195–204
Foreign exchange differences s 24I Not explicitly indexed,
may be embedded
Income timing and translation rules s 25, 25D Referenced in
admin/dispute section
Capital gains s 26A 111–139
CGT: disposal rules, inclusions, exclusions Eighth Schedule 111–139
General Anti-Avoidance Rules (GAAR) s 80A–80L (Part IIA) 310–315
Fringe benefits: company cars, housing, etc. Seventh Schedule 267–292
Employees’ tax (PAYE) Fourth Schedule Covered in admin/tax
computation examples
Returns, objections, assessments Tax Administration Act 316–325
(select refs)
Youth employment subsidy Employment Tax 262–266
Incentive Act
PAGE 1
,Taxation Revision Notes
Framework for Calculating Normal Income Tax
Description
The framework outlines the steps to calculate normal income tax, starting from gross income and
adjusting for inclusions, exemptions, deductions, and rebates to arrive at the normal tax payable.
Key Concepts
• Gross Income (s 1): The starting point of the calculation.
• Special Inclusions (s 1 GI): Amounts that are included in gross income, whether of a
capital nature or not.
• Exempt Income (s 10; S10a – 10C): Income specifically excluded from normal tax.
• Income (s 1): Gross income plus special inclusions less exempt income.
• Deductions and Allowances (ss 11-19, ss 21–24P): Expenses that can be deducted from
income (excluding s 11F & s 18A).
• Assessed Loss (ss 20 – 20B): Losses from previous years that can be used to reduce
taxable income.
• Amounts Included in Taxable Income (TI) (s 8(1)(a)): Specific items like travel
allowances.
• Taxable Capital Gain (s 26A): Capital gains that are subject to tax.
• Deduction s 11F: Deduction available only to individuals.
• Deduction ito s 18A: Donations to Public Benefit Organizations (PBOs).
• Taxable Income (s 1): The base amount on which tax is calculated.
• Tax per table: The amount of tax calculated based on taxable income, according to tax
tables.
• Rebates and Credits: Reductions in tax payable, such as provisional and employee's tax.
• Normal Tax Payable: The final amount of tax due after all adjustments.
PAGE 2
, Gross Income Definition (s 1)
Description
The definition of gross income is crucial for determining the starting point for income tax
calculation. It involves understanding what constitutes an 'amount,' what it means to be 'received
by or accrued to,' and what is 'not of a capital nature.'
Key Terms and Important Points
• Amount: Must be in cash or otherwise. It includes the value of every form of property
earned by the taxpayer, whether corporeal or incorporeal, as long as it has a money value
(Lategan case).
• Ascertainable Money Value: No amount is considered received or accrued if it does not
have an ascertainable money value at the time (Butcher Bros case).
• Quid Pro Quo: A right that cannot be transferred or actually turned into money can still
have a monetary value; objective test, not subjective (Brummeria Renaissance case).
• Received By: The earlier of when an amount is received or accrued to the taxpayer.
o The amount must be for the taxpayer's benefit to be included in Gross Income
(GI) (Geldenhuys case).
o An amount accepted with the intention to retain it for the taxpayer's own benefit
is considered 'received by' the taxpayer, even in the context of an illegal contract
(MP Finance Group CC case).
o The legal or illegal nature of a company does not determine whether its income
should be subject to tax (Delagoa Bay Cigarette Co case).
o Amounts received that might be refundable to customers are included in GI if
they are not 'trust moneys' (Pyott case).
• Accrued To: When a taxpayer acquires a right to amounts, even if paid in installments in
subsequent years, the present value of all amounts is included in GI in the current year
(Lategan case).
o The amount does not have to be due and payable; it accrues if a right to future
payments vests in the taxpayer (credit sales) (People’ Stores case).
o An amount accrues if a taxpayer becomes entitled to the proceeds, even if there's
a moral obligation to hand them over to a charity (PBO) (Witwatersrand
Association of Racing Clubs case).
o A right only accrues to the taxpayer when the conditions are fulfilled and the
right becomes exercisable – entitlement is unconditional (Mooi case).
• Not of a Capital Nature: This is determined by intention, scheme of profit-making,
mixed or dual intention, change of intention, and the nature of the asset.
PAGE 3
