, QUESTION 1 (GROSS INCOME)
1.1 Tax Year(s) in Which the Income Falls
The determination of when an amount must be included in a taxpayer’s gross
income depends on the timing of accrual or receipt, as defined in section 1 of the
Income Tax Act 58 of 1962 (“the Act”). According to this section, “gross income”
includes all amounts received by or accrued to a person during a specific year of
assessment, excluding receipts of a capital nature1.
The concept of “accrued to” was judicially interpreted in Lategan v CIR (1926 CPD
203), where it was held that an amount accrues when the taxpayer becomes entitled
to it, even if payment has not yet been received2. In contrast, an amount is “received
by” a taxpayer when it is actually or constructively received, as clarified in **CIR v
Genn & Co (Pty) Ltd (1955 (3) SA 293 (A))3.
(a) Profit earned in January 2024 (R420 000)
Lentumetse’s Pub earned a profit of R420 000 on 23 January 2024. Because the
business had commenced operations in April 2023, the relevant year of assessment
runs from 1 March 2023 to 29 February 2024. The profit accrued and was received
within this period, therefore it must be included in the 2024 year of assessment4.
(b) Payment received in February 2025 (R250 000)
The sale to Date & Wedd occurred on 15 December 2024, when Lentumetse
supplied liquor worth R400 000. The right to payment accrued at that point because
delivery of goods confers entitlement to payment, even if it is deferred 5.
Consequently, the entire R400 000 accrued to Lentumetse’s Pub in December 2024,
which falls within the 2025 year of assessment (1 March 2024 – 28 February 2025).
1
Income Tax Act 58 of 1962, s 1(1).
2
Lategan v CIR 1926 CPD 203.
3
CIR v Genn & Co (Pty) Ltd 1955 (3) SA 293 (A).
4
SARS Interpretation Note No. 24 (Issue 2), “Gross income: Receipt or accrual”.
5
CIR v People’s Stores (Walvis Bay) (Pty) Ltd 1990 (2) SA 353 (A).
1.1 Tax Year(s) in Which the Income Falls
The determination of when an amount must be included in a taxpayer’s gross
income depends on the timing of accrual or receipt, as defined in section 1 of the
Income Tax Act 58 of 1962 (“the Act”). According to this section, “gross income”
includes all amounts received by or accrued to a person during a specific year of
assessment, excluding receipts of a capital nature1.
The concept of “accrued to” was judicially interpreted in Lategan v CIR (1926 CPD
203), where it was held that an amount accrues when the taxpayer becomes entitled
to it, even if payment has not yet been received2. In contrast, an amount is “received
by” a taxpayer when it is actually or constructively received, as clarified in **CIR v
Genn & Co (Pty) Ltd (1955 (3) SA 293 (A))3.
(a) Profit earned in January 2024 (R420 000)
Lentumetse’s Pub earned a profit of R420 000 on 23 January 2024. Because the
business had commenced operations in April 2023, the relevant year of assessment
runs from 1 March 2023 to 29 February 2024. The profit accrued and was received
within this period, therefore it must be included in the 2024 year of assessment4.
(b) Payment received in February 2025 (R250 000)
The sale to Date & Wedd occurred on 15 December 2024, when Lentumetse
supplied liquor worth R400 000. The right to payment accrued at that point because
delivery of goods confers entitlement to payment, even if it is deferred 5.
Consequently, the entire R400 000 accrued to Lentumetse’s Pub in December 2024,
which falls within the 2025 year of assessment (1 March 2024 – 28 February 2025).
1
Income Tax Act 58 of 1962, s 1(1).
2
Lategan v CIR 1926 CPD 203.
3
CIR v Genn & Co (Pty) Ltd 1955 (3) SA 293 (A).
4
SARS Interpretation Note No. 24 (Issue 2), “Gross income: Receipt or accrual”.
5
CIR v People’s Stores (Walvis Bay) (Pty) Ltd 1990 (2) SA 353 (A).
