1. Introduction Flashcards
What is the first step for to calculate tax?
Calculate taxable income then normal tax
That is the most vital thing to calculate individuals tax?
The framework
What is the mnemonic for the tax framework?
GEIAT DMT
N (r) NN (p) = tax liability
What is the tax framework?
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
What is another name for normal tax?
Income tax
Are dividends exempt?
Yes, the total amount, as long as they’re not foreign
Is interest exempt?
Yes but limited to R28000
And R33000 for people older than 65
What is the most important rule for exemptions?
An amount must first be included in gross amount before it can be exempted.
What is the definition of gross income?
- For redirects, all amount received or accrued to
- Non-residents, amounts received or accrued to from source in SA
- Not of a capital nature
What is an example of income that must be included in gross income?
Salary
Is it required to have actually received the income?
No, it must have only accrued to the taxpayer
As of what date is taxable capital gains added to taxable incomes?
1/10/2001
What are the steps in calculating taxable income?
- Identify income included
- Identify amounts exempt
- Identify deductions
- Calculate taxable income
- Calculate taxable capital gain
- Calculate total taxable income
Can a minor earn income?
Yes
If married in community, how is income earned while carrying on a trade taxed?
Separately in hands of taxpayer
What is passive income?
Income earned from dividends, rent and interest
How is passive income taxed while married in community?
All passive income from both spouses are added together then divided equally to each of them.
What income are not split when married in community?
- Benefit from pension, provident, retirement
- Income specifically excluded from joint estates
- Any purchased annuity
What are the steps to calculate taxable income when married in community?
- Add together all passive income from both spouses
2. Divide equally and then to taxable income separately
What is the period of assessment for an individual?
From 1 march to 28/29 February
What is the period of assessment for someone who dies?
From 1 march till death
What is the period of assessment for someone who was born and is entitled to income?
From birth till end February
What is the period of assessment for someone who becomes insolvent?
From march till insolvency
What is the period for someone earning income for the first time?
It will have a full period of 12 months
This means apportions for rebates and such don’t apply
