TOPIC 4
Additional Questions
TAX4861
NTA4861
MARKS/
QUESTION CONTENT
MINUTES
1 Gross income, fringe benefits, medical tax credits 14/21
2 Normal tax liability, provisional tax 9/14
3 Gross income, exemptions, allowances, fringe benefits,
deductions, lump sum benefits 40/60
(TAX4861 test 4 2014 adapted)
4 Gross income, exemptions, allowances, fringe benefits,
deductions, lump sum benefits 40/60
(TAX4861 test 4 2016 adapted)
5 Gross income, allowances, fringe benefits, lump sum benefits,
employees’ tax, provisional tax 40/60
(TAX4861 test 3 2021 adapted)
6 Gross income, exemptions, non-residents (emigration),
allowances, fringe benefits, medical tax credits, lump sum
benefits, CGT 40/60
(TAX4861 test 3 2022 adapted)
Take note of the Annexure with monetary values relating to the 2024 year of assessment that is included
at the end of the integrated activities (see pages 28 and 29).
These questions are integrated at a level that we expect from a CTA 1 student. You have to
integrate previous knowledge of your undergraduate studies with the knowledge from
previous LU’s. As you work through the questions, identify where you made an error and
refer back to the legislation and/or SILKE by using the references provided in the solution to
reaffirm your knowledge and understanding of the application of the legislation.
1
,QUESTION 1 (14 marks)
Jack-of-all-Trades is a resident of the Republic, 66 years of age and married out of community of property.
He supplied you with the following information regarding his normal tax affairs in respect of the 2024 year
of assessment:
Mr Trades is one of the active members (director) of Blue Moon Investments CC and the corporation is in
the process of issuing IRP5/IT3 certificates to all its employees for the 2024 year of assessment. His
personal IRP5/IT3 certificate will where appropriate, contain reference to the following benefits,
contributions made, and employees’ tax withheld for the 2024 year of assessment:
Note R
Directors’ remuneration ......................................................................... 300 000
Bonus received...................................................................................... 36 000
Entertainment allowance ....................................................................... 1 12 000
Low-interest loan ................................................................................... 2 ?
Medical scheme contributions by employer ........................................... 3 24 000
Pension fund contributions by employer ................................................ 4 24 000
Medical scheme contributions by employee .......................................... 3 24 000
Pension fund contributions by employee ............................................... 4 24 000
Total employees’ tax withheld ................................................................ 5 64 045
Notes
1. Mr Trades received an entertainment allowance of R1 000 per month. This allowance is to be utilised
to entertain clients of Blue Moon Investments CC. He is under no obligation to submit any proof of
expenditure which has been incurred, to his employer but he has assured you that he has spent at
least R10 000 in entertaining clients during the 2024 year of assessment.
2. Mr Trades borrowed an amount of R30 000 from his employer for an overseas holiday with his family.
Interest on this loan is charged at 4% per annum. The loan was granted on 1 September 2023 and
was only paid back on 30 April 2024 (for a period of 243 days in total). The repo rate from
1 September 2023 to 29 February 2024 was 8.25% per annum.
3. The contributions to the medical scheme provide medical cover for Mr Trades, his spouse and their
two children who have been admitted to and accepted by the fund as dependents of his. The
employer makes an equal contribution to the amount that the employee made in terms of the rules
of the medical aid fund. The medical aid fund did not settle all of Mr Trades’ claims in respect of
services provided by medical practitioners to his family, in full. This means that Mr Trades incurred
qualifying medical expenses, apart from the contributions made by him during the year, amounting
to R11 175 (all medical expenses were paid for in the 2024 year of assessment).
4. Mr Trades contributed an amount equal to 8% of his monthly directors’ remuneration (R25 000) to
his employer’s pension fund while his employer contributed to this fund for his benefit on a Rand-
for-Rand basis.
5. The fact that he is a director (an employee) of the corporation means that the total employees’ tax
withheld by his employer was classified as PAYE (Pay-As-You-Earn).
REQUIRED Marks
(a) Determine the amount to be included in the taxable income of Mr Trades in respect of
his earnings from Blue Moon Investments CC (taking into account allowable deductions
as well) in respect of the 2024 year of assessment. Provide reasons for your answer,
where necessary. 10
(b) Determine Mr Trades section 6A and 6B tax credits for the year of assessment ended
29 February 2024. 4
2
, QUESTION 1 – SUGGESTED SOLUTION
(a) Taxable income in respect of employment
R R
Directors’ remuneration 300 000 (½)
Bonus 36 000 (½)
Low interest loan
R30 000 x ((8.25% + 1%) - 4%) x 182/366 783 (2)
Medical scheme contributions made by employer 24 000 (1)
Pension fund contributions made by employer 24 000 (1)
Add: Entertainment allowance (no reduction per s 8(1) and no deduction per s 23(m)) 12 000 (2)
Total remuneration/sub-total taxable income 396 783
Less: Pension fund contributions (s 11F)
Pension fund contributions – actual (employee + employer) - R48 000 (R24 000 + R24 000)
Limited to the lesser of
• R350 000; or
• 27.5% x greater of:
remuneration (R396 783); and
taxable income (incl taxable capital gains) (R396 783)
Thus, 27.5% x R396 783 = R109 115; or
• Taxable income excluding any taxable capital gains (R396 783)
Therefore, R109 115 (lesser), but deduction limited to actual (48 000) (3)
Taxable income from employment 348 783 10
(b) Section 6A and 6B tax credits which Mr Trades qualify for, for the year of assessment
ended 29 February 2024
R R
Section 6A tax credit (R364 x 2) + R246 + R246 = R1 220 x 12 (14 640) (1)
Section 6B tax credit (R15 255 x 33.3%) (5 080) (1)
Total medical scheme contributions (R24 000 + R24 000) 48 000 (½)
Less: Section 6A tax credit (R14 640 x 3) (43 920) (1)
Qualifying contributions 4 080
Plus: Qualifying medical expenses 11 175 (½)
15 255
4
Total 14
3
Additional Questions
TAX4861
NTA4861
MARKS/
QUESTION CONTENT
MINUTES
1 Gross income, fringe benefits, medical tax credits 14/21
2 Normal tax liability, provisional tax 9/14
3 Gross income, exemptions, allowances, fringe benefits,
deductions, lump sum benefits 40/60
(TAX4861 test 4 2014 adapted)
4 Gross income, exemptions, allowances, fringe benefits,
deductions, lump sum benefits 40/60
(TAX4861 test 4 2016 adapted)
5 Gross income, allowances, fringe benefits, lump sum benefits,
employees’ tax, provisional tax 40/60
(TAX4861 test 3 2021 adapted)
6 Gross income, exemptions, non-residents (emigration),
allowances, fringe benefits, medical tax credits, lump sum
benefits, CGT 40/60
(TAX4861 test 3 2022 adapted)
Take note of the Annexure with monetary values relating to the 2024 year of assessment that is included
at the end of the integrated activities (see pages 28 and 29).
These questions are integrated at a level that we expect from a CTA 1 student. You have to
integrate previous knowledge of your undergraduate studies with the knowledge from
previous LU’s. As you work through the questions, identify where you made an error and
refer back to the legislation and/or SILKE by using the references provided in the solution to
reaffirm your knowledge and understanding of the application of the legislation.
1
,QUESTION 1 (14 marks)
Jack-of-all-Trades is a resident of the Republic, 66 years of age and married out of community of property.
He supplied you with the following information regarding his normal tax affairs in respect of the 2024 year
of assessment:
Mr Trades is one of the active members (director) of Blue Moon Investments CC and the corporation is in
the process of issuing IRP5/IT3 certificates to all its employees for the 2024 year of assessment. His
personal IRP5/IT3 certificate will where appropriate, contain reference to the following benefits,
contributions made, and employees’ tax withheld for the 2024 year of assessment:
Note R
Directors’ remuneration ......................................................................... 300 000
Bonus received...................................................................................... 36 000
Entertainment allowance ....................................................................... 1 12 000
Low-interest loan ................................................................................... 2 ?
Medical scheme contributions by employer ........................................... 3 24 000
Pension fund contributions by employer ................................................ 4 24 000
Medical scheme contributions by employee .......................................... 3 24 000
Pension fund contributions by employee ............................................... 4 24 000
Total employees’ tax withheld ................................................................ 5 64 045
Notes
1. Mr Trades received an entertainment allowance of R1 000 per month. This allowance is to be utilised
to entertain clients of Blue Moon Investments CC. He is under no obligation to submit any proof of
expenditure which has been incurred, to his employer but he has assured you that he has spent at
least R10 000 in entertaining clients during the 2024 year of assessment.
2. Mr Trades borrowed an amount of R30 000 from his employer for an overseas holiday with his family.
Interest on this loan is charged at 4% per annum. The loan was granted on 1 September 2023 and
was only paid back on 30 April 2024 (for a period of 243 days in total). The repo rate from
1 September 2023 to 29 February 2024 was 8.25% per annum.
3. The contributions to the medical scheme provide medical cover for Mr Trades, his spouse and their
two children who have been admitted to and accepted by the fund as dependents of his. The
employer makes an equal contribution to the amount that the employee made in terms of the rules
of the medical aid fund. The medical aid fund did not settle all of Mr Trades’ claims in respect of
services provided by medical practitioners to his family, in full. This means that Mr Trades incurred
qualifying medical expenses, apart from the contributions made by him during the year, amounting
to R11 175 (all medical expenses were paid for in the 2024 year of assessment).
4. Mr Trades contributed an amount equal to 8% of his monthly directors’ remuneration (R25 000) to
his employer’s pension fund while his employer contributed to this fund for his benefit on a Rand-
for-Rand basis.
5. The fact that he is a director (an employee) of the corporation means that the total employees’ tax
withheld by his employer was classified as PAYE (Pay-As-You-Earn).
REQUIRED Marks
(a) Determine the amount to be included in the taxable income of Mr Trades in respect of
his earnings from Blue Moon Investments CC (taking into account allowable deductions
as well) in respect of the 2024 year of assessment. Provide reasons for your answer,
where necessary. 10
(b) Determine Mr Trades section 6A and 6B tax credits for the year of assessment ended
29 February 2024. 4
2
, QUESTION 1 – SUGGESTED SOLUTION
(a) Taxable income in respect of employment
R R
Directors’ remuneration 300 000 (½)
Bonus 36 000 (½)
Low interest loan
R30 000 x ((8.25% + 1%) - 4%) x 182/366 783 (2)
Medical scheme contributions made by employer 24 000 (1)
Pension fund contributions made by employer 24 000 (1)
Add: Entertainment allowance (no reduction per s 8(1) and no deduction per s 23(m)) 12 000 (2)
Total remuneration/sub-total taxable income 396 783
Less: Pension fund contributions (s 11F)
Pension fund contributions – actual (employee + employer) - R48 000 (R24 000 + R24 000)
Limited to the lesser of
• R350 000; or
• 27.5% x greater of:
remuneration (R396 783); and
taxable income (incl taxable capital gains) (R396 783)
Thus, 27.5% x R396 783 = R109 115; or
• Taxable income excluding any taxable capital gains (R396 783)
Therefore, R109 115 (lesser), but deduction limited to actual (48 000) (3)
Taxable income from employment 348 783 10
(b) Section 6A and 6B tax credits which Mr Trades qualify for, for the year of assessment
ended 29 February 2024
R R
Section 6A tax credit (R364 x 2) + R246 + R246 = R1 220 x 12 (14 640) (1)
Section 6B tax credit (R15 255 x 33.3%) (5 080) (1)
Total medical scheme contributions (R24 000 + R24 000) 48 000 (½)
Less: Section 6A tax credit (R14 640 x 3) (43 920) (1)
Qualifying contributions 4 080
Plus: Qualifying medical expenses 11 175 (½)
15 255
4
Total 14
3
