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TXN 201 > 1. Introduction > Flashcards

1. Introduction Flashcards

1
Q

What is the first step for to calculate tax?

A

Calculate taxable income then normal tax

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2
Q

That is the most vital thing to calculate individuals tax?

A

The framework

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3
Q

What is the mnemonic for the tax framework?

A

GEIAT DMT

N (r) NN (p) = tax liability

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4
Q

What is the tax framework?

A 
Gross Income
(Exempt Income)
-----------
Income
(allowable deductions: other/pension/retirement)
Taxable Capital Gains
(donations)
(medical expenses)
--------------
Taxable income
--------------
Normal tax
(rebates)
-----------
Net normal tax
(prepaid tax: SITE/PAYE/Provisional)
-----------
Tax liability
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5
Q

What is another name for normal tax?

A

Income tax

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6
Q

Are dividends exempt?

A

Yes, the total amount, as long as they’re not foreign

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7
Q

Is interest exempt?

A

Yes but limited to R28000

And R33000 for people older than 65

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8
Q

What is the most important rule for exemptions?

A

An amount must first be included in gross amount before it can be exempted.

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9
Q

What is the definition of gross income?

A
  1. For redirects, all amount received or accrued to
  2. Non-residents, amounts received or accrued to from source in SA
  3. Not of a capital nature
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10
Q

What is an example of income that must be included in gross income?

A

Salary

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11
Q

Is it required to have actually received the income?

A

No, it must have only accrued to the taxpayer

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12
Q

As of what date is taxable capital gains added to taxable incomes?

A

1/10/2001

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13
Q

What are the steps in calculating taxable income?

A
  1. Identify income included
  2. Identify amounts exempt
  3. Identify deductions
  4. Calculate taxable income
  5. Calculate taxable capital gain
  6. Calculate total taxable income
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14
Q

Can a minor earn income?

A

Yes

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15
Q

If married in community, how is income earned while carrying on a trade taxed?

A

Separately in hands of taxpayer

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16
Q

What is passive income?

A

Income earned from dividends, rent and interest

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17
Q

How is passive income taxed while married in community?

A

All passive income from both spouses are added together then divided equally to each of them.

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18
Q

What income are not split when married in community?

A
  1. Benefit from pension, provident, retirement
  2. Income specifically excluded from joint estates
  3. Any purchased annuity
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19
Q

What are the steps to calculate taxable income when married in community?

A
  1. Add together all passive income from both spouses

2. Divide equally and then to taxable income separately

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20
Q

What is the period of assessment for an individual?

A

From 1 march to 28/29 February

21
Q

What is the period of assessment for someone who dies?

A

From 1 march till death

22
Q

What is the period of assessment for someone who was born and is entitled to income?

A

From birth till end February

23
Q

What is the period of assessment for someone who becomes insolvent?

A

From march till insolvency

24
Q

What is the period for someone earning income for the first time?

A

It will have a full period of 12 months

This means apportions for rebates and such don’t apply

25
Q

How is normal tax calculated?

A

Use tax tables and use taxable income

26
Q

What is the marginal tax rate?

A

It is the tax rate charged on every additional R1 earned.

27
Q

What is the average tax rate?

A

The tax rate applied to the total taxable income

28
Q

What are rebates?

A

Amounts allowed to person’s to reduce normal tax

29
Q

What are the actual rebates?

A

Primary: for all persons
Secondary: for persons over 65 but under 75
Tertiary: for persons over 75

30
Q

What would the total rebate be for someone over 75?

A

All rebates added together

31
Q

When must someone to 65 or 75 to qualify for secondary or tertiary rebates?

A

They must have turned the specified age on at least the last day of assessment

32
Q

What are done with rebates if taxpayer dies before end of period of assessment?

A

They are apportioned for time they were alive

33
Q

What are rebates limited to?

A

Normal tax

Cannot go beyond Nik

34
Q

If a person earns an income for the first time half ay through year, how much rebate do they get?

A

They qualify for the full rebate

35
Q

Where are rebates deducted from?

A

Normal tax

NOT table income

36
Q

What are the deductions for medical scheme benefits (health insurance)?

A
  1. R216 for benefit to a person
  2. R432 for person and one dependent
  3. R432 for person and on dependent then added R144 for each extra dependent
    For each month
37
Q

What is the 6quat rebate?

A

Taxpayer included foreign income in which he paid foreign taxes, they get a rebate

38
Q

What is the 6quin rebate?

A

Taxpayer included local Income for which he paid foreign taxes, rebate is allowed

39
Q

What is 6sex rebate?

A

Dividends income from foreign companies which has been taxed can get rebate

40
Q

What is the final step in calculating individual tax?

A

Net normal tax liability

41
Q

What is net normal tax reduced by?

A

Amounts already paid for

42
Q

What is employee tax?

A

Amount deducted by employer from salary

Include SITE and PAYE

43
Q

What are the prepayments that reduce net normal tax?

A
  1. Employee tax

2. Provisional tax.

44
Q

What is provisional tax?

A

Tax paid by employee throughout the year

45
Q

What happens of a taxpayer is late to pay tax?

A

They will be charged interest

46
Q

What happens when a taxpayer has overpaid ?

A

Interest may be given back

47
Q

Which prepayment tax can NEVER be repaid?

A

SITE because it a final tax

48
Q

If refunds are due, which amounts will SARS pay back first?

A

First provisional then PAYE

they will never pay back SITE

TXN 201 (9 decks)

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