Tax for Salaried Employees memo

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Tax For Salaried Employees (long assessment memorandum) 07/2014
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Subject: Optional Accreditation: Tax
for Salaried Employees Assessment
Year 2014/2015
(Long Assessment)

Duration: 3 hours
Candidates full names: _______________________
Candidates code: ___________________________
Candidates email address: ____________________

Date: _______________________________
Area: _______________________________

TOTAL MARKS: [100]

MARK FOR CANDIDATE: ______________%

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THE CANDIDATE MAY MAKE USE OF ANY MATERIAL THAT HE/SHE FEELS WILL
ASSIST HIM/HER IN COMPLETING THE ASSESSMENT. THIS IS AN OPEN BOOK
ASSESSMENT. MATERIAL MAY NOT BE SHARED. Candidates must note the
dates in the various questions very carefully as specific rates and
calculations need to be applied depending on the tax year that a specific
question refers to.
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SECTION A- MULTIPLE CHOICE /TRUE/FALSE QUESTIONS [20]

Circle the correct answer.
1. The tax system in South African is based:
a. Direct taxation
b. Indirect taxation
c. Direct and indirect taxation
d. None of the above (1)

2. John entered into a contract with James whereby John was to remove the
alien plants from James garden. The agreement was that John would be
paid R5 000 when he started the work and R4 000 when he completes the
work. John was paid the first amount of R5 000 on the 25th of February 2014
and the balance was paid when the work was completed on the 5th of
March 2014. The payments included in Johns gross income for the tax year
ending February 2014/2015 are:
a. R 5 000
b. R 4 000
c. R 5000 and R4 000
d. Both amounts will be excluded from his 2014/2015 gross income. (1)

3. When calculating a clients maximum tax-deductible pension fund
Contribution, one must use:
a. The lesser of R3500 and 8.5% of Pensionable income
b. The greater of R3500 and 8.5% of Pensionable income
c. The lesser of R1750 and 7.5% of Pensionable income
d. The greater of R1750 and 7.5% of Pensionable income
e. None of the above
(1)
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4. Mr. Smith (aged 50) is married and has one child, aged 16. Mr. Smith is
employed by Big Ltd and is a member of the Goodhealth Medical Scheme.
Mrs Smith and the child are dependants in terms of the scheme. The monthly
contributions which are R4500 are paid by Big Ltd. Assuming that there are no
other amount paid by Big Ltd for Mr. Smiths benefit, the amount included in
Mr Smiths gross income as a taxable fringe benefit for the year of assessment
2014/2015 will be
a. R4 500
b. R 54 000
c. R45 000
d. R 0 (1)

5. Mr Jones retired from Big Ltd but has remained a member of the Goodhealth
Medical Scheme. Big Ltd pays R500 per month to the scheme in respect of Mr
Jones membership, he does not contribute to the scheme. The amount
included in Mr Jones gross income for the year of assessment 2014/2015 will be
a. R500
b. R 6 000
c. R5 000
d. R 0
6. Peter sells his holiday house in April 2014 for R2 500 000 having purchased it in
2002 for R950 000, and in the same year of assessment sells R100 000 unit trusts,
having purchased same for R80 000. What is Peters taxable capital gain, if
any?
a. R512 820
b. R1 570 000
c. R 540 000
d. R133 500
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e. None of the above (1)
7. The Shaik Family Testamentary Trust, set up on the death of Mr Shaik, for his
children Sam aged 2 and James aged 17, earns rental income of R 240 000
for the 2014/2015 year of assessment. No distributions are made. Its tax per
scales for the 2014/2015 tax year is:
a. R 96 000
b. R47 782
c. R 47 970
(1)

8. Muzi is aged 75 and has a taxable income of R420 000 for the tax year
2014/2015. He also has an assessed capital loss of R15 000 carried over from
the previous tax year as well as an aggregate capital loss of R12 000 for the
current tax year. His tax payable is:
a. R 80 072
b. R 82 439
c. R89 549
d. R 102 275
(1)

9. A taxpayer younger than 75 and earning a taxable income of R 104 611 or
less annum, will not pay any income tax in the 2014/2015 tax year.
True or False? (1)

10. Mark is 45 year of age and his taxable income for the 2014/2015 year of
assessment is R62 500,his tax payable is
a. R11 250
b. R 0
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c. R 9 075.60
(1)

11. An employee is taxed on the value of the fringe benefits he receives.
True or False? (1)
12. No fuel cost may be claimed if the employee has not borne the full cost of
fuel used in the vehicle and no maintenance cost may be claimed if the
employee has not borne the full cost of maintaining the vehicle. True or false
(1)

13. If an employee is reimbursed for business kilometres traveled, no tax will be
payable provided:
a. The travel allowance is based on actual business kilometers
traveled.
b. The distance traveled in the vehicle for business purposes is accurately
recorded in a log book.
c. No other compensation in the form of a further travel allowance or
reimbursement is paid by the employer to the employee.
d. (a) and (c)
e. (a) (b) and (c)
(1)

14. A divorce award made after 13 September 2007 and deducted from the
members minimum individual reserve on or after 1 March 2009 is taxable in
the non-member spouses hands, and is deemed to accrue on the date of
election by the non-member spouse or the date on which the amount is
paid in terms of the Pension Fund Act if no election is made. True or False
(1)
15. A non-member spouse may transfer a divorce award from:
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a. pension fund or pension preservation fund to a pension
preservation fund.
b. A provident fund or provident preservation fund to a provident
preservation fund.
c. (a) and (b)
d. None of the above
(1)

16. The tax credit available to tax payers under the age of 65, for medical
contributions is
a. R 242 for tax payer and R 484 for tax payer and one dependant
b. R 257 for tax payer and R 514 for tax payer and one dependant
(1)

17. Mr. Stewart contributes R3 500 per year to a Retirement Annuity (this is the
maximum deduction Mr. Stewart is allowed). In year two Mr. Stewart reduces
his contribution to R1 500. In year three Mr. Stewart wishes to resume his full
contribution towards the Retirement Annuity. He would also like to pay an
additional arrear contribution of R2 000 towards the premium in year two.
Calculate the total allowable deductions in year three.
a. R5 300
b. R3 500.
c. 15% of the taxpayers non-retirement funding income.
d. R1 800.
(1)

18. A withholding tax must be withheld by the purchaser in respect of the
disposal by non-residents of immovable properties with a value in excess of:
a. R2 000 000
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b. R1 500 000
c. R 120 000
d. R 750 000
(1)

19. If the taxpayer dies during the year, but would have been 65 at the end of
the year of assessment had he lived,
a. The secondary rebate is not deducted from his tax.
b. The secondary rebate is still deducted from his tax, but would be
apportioned.
c. The secondary rebate is still fully deducted from his tax
(1)

20. Donations made by spouses married in community of property are dealt
with as follows:
a. If the donated property fell within the joint estate, the donation is deemed
to be made in equal shares by each spouse
b. If the donated property was excluded from the joint estate, the donation
is deemed to be made solely by the spouse making the donation.
c. If the donated property was excluded from the joint estate, the donation
is still deemed to be made in equal shares by each spouse.
d. (a) and (b)
(1)

SECTION B SHORT QUESTIONS & CGT [30]

1. Mr. Cs taxable income for the tax year ended 28 February 2015 was R250
000 His employer contributes R1 500 pm to the medical aid in respect of Mr.
Cs membership Mr. C is 24 years old and has no dependants

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1.1 Calculate the fringe benefit that will be included in gross income in
respect of medical aid contributions by Mr. Cs employer. (4)

1.2 Calculate Mr. Cs medical tax credit that can be deducted from his final
tax liability. (4)

2. Mr. Mnisi, who is married in community of property and is under 65, has the
following income and expenditure for the year ended 28 February 2015:
Salary R 260 000
Interest (joint account) R 60 000
Rental Income (fixed property) R 52 000
Expenses relating to the fixed prop. R 13 000
Dividends (Old Mutual SA) R 2 000
Calculate Mr. Mnisis income tax liability for year of assessment 2014/2015,
using the calculation worksheet. Show all calculations. (10)
Income Tax Calculation Sheet
GROSS INCOME
Salary R
Trade Business R
Commission R
Interest R
Dividends (subject to DWT) ) R
Dividends (other foreign - see note) R
Other R
Total R R
EXEMPTIONS
Basic Interest R
Dividends (subject to DWT) R
Dividends (other foreign) R
Foreign employment
income.
R
Other. R
R - R
INCOME R
DEDUCTIONS
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Expenses R
Pension fund contributions R
Retirement annuities contributions R
Donations to PBCs R
Other R R
R
Plus: Portion of travel allowance not expended on
business travel
R
Plus: Taxable Capital Gain R - R
TAXABLE INCOME R
Tax on R. R
+ % on R. + R
TAX PER SCALE R
REBATES
Primary R
65+ R
75+ R -
MEDICAL TAX CREDITS
Less: Medical Scheme Fees Credit R R
Less: Medical Expenses Credit R
R
TAX PAYABLE
R

3. Sarah aged 30 is employed by Company XYZ, she contributes R24 000 per
year to her medical aid scheme. Sarah incurred medical expenses of
R30 000 for the year which was not covered by her medical aid. Her taxable
income is R 400 000. What is Sarahs total medical tax credits for the year of
assessment 2014/2015. (10)

4. Sam sold her residential property on the 8
th
of April 2014 for R 5 000 000. She
bought the property on the 5th of June 2004 for R 1 200 000. She built a pool,
which cost R50 000 and a braai for R40 000, she also repainted the house for
R35 000 and spent R400 a month on garden services. Other expenses
incurred by Sam were agents commission of R60 000. This property was her
primary residence.
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1.3 What may be included in the base cost for capital gains tax purposes
and what is the base cost?
(2)
1.4 What is the taxable capital gain assuming no other capital gains or
losses?
(2)

SECTION C RESIDENCE AND FOREIGN EMPLOYMENT [30]

1. Mr. V came to SA from Angola on the 15th of November 2006 to work
temporarily for a mining equipment company. His wife and children stayed
in Angola, and he returned to visit them for one month in the year (July).
Due to the nature of the work, his contract and visa were extended and the
only times he spent out of SA where for the month he returned to Angola. His
contract terminates on the 15th of April 2014.
The following is a breakdown of the amount of time he has spent in South
Africa:
2015: 46 days
2014: 335 days
2013: 334 days
2012: 335 days
2011: 334 days
2010: 334 days
2009: 334 days.
2008: 335 days.
2007: 106 days.

(a) Will Mr. V be deemed a resident in South African for tax purposes in the
year of assessment 2014/2015? (7)
(b) How would your answer differ if Mr. V had left SA on the 10
th
June 2012?
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(3)
Note: Full explanation of the relevant law being applied is required in your
answer.

2. Mary aged 37 is a nurse. She is currently working in London in the United
Kingdom. She is married out of community of property to Samual, who
unfortunately has had to remain in South Africa with the children as he works
for a large SA corporation. She started work for a London Hospital from 1
March 2014. Assume you are now assisting her with completing an SA tax
return for the 2014/2015 tax year. Assume the rand is R20 to the pound.
She earns 4500 p.m. (pre-tax) (R 90 000 pm).
Mary has a number of investments:
i) Fixed Deposit: SA Bank
Interest R35 000
ii) SA unit trusts from which she received the following income:
Interest - R20 000
Local dividends (subject to DWT) R14 000

(a) She wants you to help her complete her South African tax return for
2014/2015-tax year. What is her taxable income? Show all calculations
on attached worksheet. (13)

Calculation of Income Tax
GROSS INCOME
Salary R
Trade/business R
Commission R

SA interest: R
SA interest: R

SA Dividends R
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Total R R
EXEMPTIONS
Local interest R
SA Dividends R
Other Foreign employment income
s 10(1)(o) (1)
R
R R
INCOME R
DEDUCTIONS
Expenses R
Entertainment R
Travel R
Pension R
Retirement Annuities R
Donations R
Medical R
Other R
R 0 R
TAXABLE INCOME R

(b) What tax will she pay in South Africa if we assume her taxable income
for 2014/2015 in South Africa is R151 000? (3)

SECTION D TRAVEL ALLOWANCE AND RA CONTRIBUTIONS [20]

1. Warren receives a travel allowance of R 800 per month from his employer.
Due to the change in legislation he has recorded his business travel in a
logbook, which has amounted to 2000 kilometers.
The value of Warrens vehicle is R 40 500 (inc VAT), and the total kilometres
traveled for the year amount to 20 000km. Warren bears the full cost of fuel
and maintenance

(a) Calculate his deduction in respect of traveling expenses for the
2014/2015 tax year (show full workings). (8)
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(b) What percentage of his travel allowance would have been reflected on
his pay-slip as having been taxed during the year of assessment? (2)

2. For the year ended 2015 Mr. Refilwe receives the following income:
(a) Fees from private practice R 600 000
(b) Salary from employment in respect R 360 000
of which he belongs to a pension fund.
(c) Dividends (Subject to DWT) R 21 000
(d) Interest R 23 000
(e) Rental Income R 60 000
He has the following expenses:
(f) Expenses of running the practice (All tax deductible) R 70 000
(g) Pension fund contributions R 15 000
(h) RA contributions R 30 000
(i) Expenses allowable against rental income R 20 000

Calculate the maximum deductible contribution Mr. Refilwe can make to a
retirement annuity. Mr Refilwe is younger than 65. (10)