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TXN 201 > 2. Taxable Income Of Salaired Persons > Flashcards

2. Taxable Income Of Salaired Persons Flashcards

1
Q

Which amounts received from an employer are taxable?

A

All amounts included bonuses

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2
Q

What dividends and interest taxable even though they aren’t received by employer?

A

Yes

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3
Q

How are taxpayer’s foreign dividends taxed?

A

Subject to withholding tax

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4
Q

What ratio of foreign dividends are exempts?

A

25/40

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5
Q

What is taxable even though it’s not received by employee?

A

Dividends

Interest

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6
Q

What are taxpayer’s foreign dividends subject to?

A

Withholding tax

They are exempt to a ratio of 25/40

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7
Q

Can foreign dividends be exempted?

A

As of 2013 no

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8
Q

Mnemonic of specific deductions?

A

Let’s dirty bens party pistol, he’ll call cops, doesnt matter

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9
Q

What are the specific deductions in order?

A 
Legal expenses
Depreciation
Bad debts
Provisions for bad debts
Premiums paid for insurance against loss of income
Home study expenses
Contribution to pension fund
Contribution to retirement annuity fund
Donations
Medical expenses
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10
Q

When can legal expense be deducted?

A

Only if they incurred in respect of claim concerning ordinary operations

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11
Q

When can wear and tear be claimed as a deduction?

A

If it was incurred during production of income

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12
Q

When can bad debts be claimed as deduction?

A

If they can prove employee won’t pay income

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13
Q

When can entertainment expenses be claimed as deduction?

A

If employee is an agent who earn more than 50% of income in form of commission and it’s earned during production of income, not in capital of nature

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14
Q

When can home office expenses be claimed as deduction?

A

If employee is forced to use home as workplace

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15
Q

What are the limitation of deductions for current year contributions to pension funds?

A

Greater of:

  1. R1759
  2. 7.5% of remuneration earned during the year from retirement funding employment
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16
Q

What is retirement funding employment?

A

Salary, commission or bonus that is used for contributions toward pension funds

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17
Q

If an employee earns a salary and is not a member of a pension fund, is the salary retirement funding employment?

A

No

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18
Q

What is not normally taken into account when calculating current pension fund contributions?

A
  1. Lump-sum gratuities
  2. Accumulated leave pay
    These don’t usually constitute retirement funding employment
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19
Q

What is a past period contribution to pension fund?

A

Where a taxpayer can buy back past pension benefits where they were not originally part of

20
Q

What are the deduction limitations for past period contributions to pension fund?

A

R1800 per annum

21
Q

What is awesome about being in the liberation movements armed wings?

A

The limitation of R1800 on past period contributions is gone, they can deduct the entire amount

22
Q

Are contributions to provident funds deductible?

A

No

Employee does not make contributions to them

23
Q

Is income earned on which provident fund contributions are made considered retirement funding employment?

A

Yes

24
Q

What are the limitations on current contributions to retirement annuity fund?

A

Limited to greater of:

  1. 15% of income after deducting
    - all expenses excluding this one
    - excluding retirement lump sum benefits
    - retirement lump sum withdrawals
    - severance benefit
    - income derived from retirement funding employment
  2. R3500 less current contribution deduction allowed to pension fund
  3. R1750
25
Q

What are done with current contributions to retirement fund that are not allowed as deduction in this year?

A

They are carried forward and allowed as deduction next year

26
Q

What is a reinstatement contribution?

A

Where taxpayer prematurely discontinues contributions to retirement fund

27
Q

How are the deduction limitation on reinstatement contributions?

A

R1800

28
Q

Which donations may be deducted from taxable income?

A

Only donations that are made to a qualifying PBO and they issue a section 18A receipt for it.

29
Q

Can a donation be deducted if no section 18A receipt is received?

A

No

30
Q

What are some examples of qualifying PBO ?

A
  1. Educational institutions
  2. Conservation organizations
  3. Social welfare bodies
31
Q

Do church and religious groups qualify as PBO?

A

No

32
Q

What is the limitation of deduction for donations?

A

10% x taxable income up to donations

33
Q

What is the difference between medical expenses and medical aid contributions

A

Medical expense are qualifying expenses that medical aid does not cover

34
Q

What are the categories for medical expense?

A
  1. Taxpayer over 65
  2. Taxpayer under 65 and has a disability (disability dependent)
  3. Taxpayer under 65 with no disabilities
35
Q

What are the medical expense deductions for category 1?

A

All medical expenses are decutible

36
Q

What are the medical expense deductions for category 2?

A
  1. Calculate all medical aid contributions
  2. Calculate medical scheme fees tax credit and deduct from medical aid contributions
  3. Determine all qualifying medical expenses not covered by medical aid
  4. Add amount in part 3 to part 4. This amount is deductible as medical expense
37
Q

What is the medical deduction for category 3?

A
  1. Medical aid contributions
  2. Medical scheme fees tax credit, deduct from medical aid contributions
  3. Qualifying medical expenses
  4. Add amounts 3 and 2
  5. If total exceeds 7.5% of taxable income before medical expenses then e excess is allowed as deduction
38
Q

Can a deduction for medical expenses create an assessed loss?

A

Yes

39
Q

What are the medical scheme fees tax credit amounts?

A
  1. R257 for taxpayer
  2. R257 for 1st dependent
  3. R172 for further dependents
40
Q

What is a lump sum gratuity?

A

It’s is a single, once off payment of a benefit in cash

41
Q

What constitutes non retirement funding income?

A

All the income less:

  • retirement funding income (income used to contribute towards retirement funds)
  • retirement lump sum withdrawals
  • all expenses (excluding contribution to retirement annuity fund)
  • severance benefits
42
Q

What is retirement fund income?

A

Total amount of taxable earnings that are used to calculate the retirement find contributions.

43
Q

What is NRFI?

A

Non retirement fund income is the total of earnings that are NOT used in calculating retirement fund contributions.

44
Q

Why do we need to know RFI?

A

So we know what amount to use to calculate current contributions to the pension fund

45
Q

Why do we need to know the NRFI

A

To use it to calculate the amount of current retirement annuity fund contributions

TXN 201 (9 decks)

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