Individuals Flashcards
1
Q
How are minor children taxed?
A
In their own name.
2
Q
How are married persons taxed?
A
In their own name unless they are married in community of property, then they are taxed jointly.
3
Q
Explain S10(1)(nA) - Uniform allowances
A
Exemption of allowance allowed if:
- is condition of employment
- to wear while on duty
- distinguishable from ordinary clothing
4
Q
When will an exemption be granted ito Relocation Benefits?
A
- employee moves @ insistence of employer
- employer bears cost
- transportation involves change of residence
Must be a result of: - appointment
*transfer
*dismissal
5
Q
What amounts are exempt ito Relocation benefits?
A
- transportation costs to new res
- selling costs and settling in costs
- hiring of temp res
6
Q
When will a bursary be exempted?
A
If:
A bona fide bursary is granted to assist or enable a person to study at a recognised educational or research institute.
7
Q
What are the rules ito bursary exemptions for an employee?
A
- Employee= must agree to reimburse employer if fail to complete
8
Q
What are the rules ito bursary exemptions for a relative of the employee?
A
- Relative =
NQF 1-4: lmt R20000
NQF 5-10: lmt R60000
Only if employee’s remuneration < R600000
9
Q
What are the rules ito bursary exemptions for a disabled relative of the employee?
A
NQF 1-4: lmt to R30000
NQF 5-10: lmt to R90000
Only if employee’s remuneration < R600000
10
Q
What are the principles regarding reimbursive allowances?
A
- excluded from TI of recipient
- has to be paid from ER to EE
- must be instructed by ER to incur expenditure
- must account and provide proof of expenditure.
11
Q
What are the 2 types of travel allowances?
A
- allowances iro transport expenses
- motor car allowances
12
Q
What is the taxable portion of travel allowances?
A
The portion of the allowance that is expended for private travel.
13
Q
How is business use calculated, ito travel allowances?
A
Business use =
business km’s x cost per km
14
Q
How calculate the deemed cost per km used to calculate cost per km?
What is it based on?
A
- use the table that consists of the 3 components.
- fixed costs in R
- fuel costs in C
- maintenance costs in C
The costs are based on table and on the value of the car
15
Q
How is the value of the vehicle determined?
A
1) Cost (incl VAT)
2) MV + VAT
3) Sale price + VAT
16
Q
When will there be no deductions for travel allowances?
A
When the EE has a right of use vehicle and is granted a travel allowance.
17
Q
What is the simplified method for reimbursive travel allowance?
A
398c per km
18
Q
What is a subsistence allowance?
A
allowance that is granted by ER on:
- accomodation
- meals
- obliged by reasons of their duties to spend more than one night away from usual residence.
19
Q
What is the deduction that EE can deduct ito subsistence allowance?
A
- Actual amount spent for accommodation
- Meals and incidental costs - R452 per day.
- Incidental costs only - R139 per day
- limited to the amount received
20
Q
What is a fringe benefit?
A
Benefit that is not cash. The taxable amount is the cash equivalent of the value of the benefit, the value is ito 7th Schedule - consideration.
21
Q
Explain the remuneration proxy.
A
It is remuneration derived by the employee in the previous year of assessment, excluding value for residential accommodation.
- includes other fringe benefits
- includes only 80% of travel allowances
- not include subsistence allowance.
- apportioned if employee has worked only part of year.
22
Q
Describe the principles of acquiring an asset @ less than actual value or no value.
A
When ER gives EE any asset where the value of the asset is:
- MV (General)
- Cost (specifically)
- Lower of the (trading stock given) Cost/MV
- VAT to be included in value.
23
Q
What is the taxable benefit with regards to an asset acquired for less than actual value/none?
A
The benefit = value of the asset - consideration paid by EE.
24
Q
How will a bravery or long service reward be taxed?
A
The value of the asset will be reduced with the lessor of:
- R5000
- Aggregate cost of the year.
25
When ER provides low-cost housing as a FB to EE, what are the requirements that need to be met for it to be exempted?
- value of the house < 450 000
- remuneration proxy of EE < 250 000
- EE should not be a connected person
26
What is a right-of-use asset?
When EE is granted the right to use and asset for private/domestic purposes, for free/
27
How is the value of a right-of-use asset determined?
15% per year x lower of:
- MV
- Cost
x part of year it is used by EE
28
How is the value of the right- to- use asset calculated when EE will have right to use for majority or all of assets' life?
The COST to ER will always be used.
29
What is the benefit when EE has right to use motor vehicle?
Benefit = value of private use - consideration paid.
30
What is the value of private use?
| right of use vehicle
= Determined value of the vehicle
| = cost + VAT
31
What will the value of private use be if the vehicle is owned by the ER?
- value x 3,5% pm
OR
- value x 3,25% pm (if maintenance plan)
32
What happens when the EE receives a second hand car?
The value of the vehicle will be reduced by 15% for each completed year.
33
What happens when the EE receives the right to use more than 1 vehicle?
Then the vehicle with the highest taxable value will be used.
34
When will the private use value be reduced?
When:
- EE has accurate records of the business km's.
- EE has paid certain costs
- EE paid fuel for private trips.
35
What are the exclusions of a right of use vehicle?
- vehicle that is used by EE in general
- Private use = infrequent/incidental
- Vehicle is not normally kept at the EE's residence, when not in use.
- EE is regularly required to use vehicle for the performance of his duties outside normal business hours.
- not permitted to use for private travel except to work.
36
What is the benefit for meals, refreshments and refreshment voucher?
```
Benefit = value less consideration paid by employee.
value = cost to employer of providing it.
```
37
What are the exclusions ito meals, refreshments and -vouchers?
- annual lunches
- provided during extended working hours
- canteen that is used by all EE.
38
What is the benefit for residential accomodation?
Benefit = value less consideration paid by EE
| contributions to rental
39
How is the value determined?
| residential accommodation
Value:
1) Formula
2) lower of formula/cost
3) par 9(4) amount iro holiday accommodation
4) Low interest loan
40
How is the formula used in determining the value of residential accomodation?
(A-B) x C/100 x D/12
```
A = remuneration proxy
B = R83100
C= 19/18/17
D= no. of months EE is entitled to use accommodation
```
41
What is the value of the residential accommodation when it is rented out?
It is the lower of the:
- formula
- rent ER + expenses defrayed by ER
42
What is the value of residential accommodation iro Holiday residence?
Value =
Cost incurred by ER if hired by ER
OR
normal daily rate per person
43
What are the exception ito residential accommodation?
- Rental value can be reduced by Commissioner if rental is unfair
- >1 unit --> Highest rental value used
- No value if away from usual place of residence
44
How to calculate the FB for a low interest rate loan received by the EE?
Benefit = interest on loan @ official rate - Interest paid by EE
45
What is free or cheap services?
Services received by the EE for free or less than the cost to the employee.
46
What is the taxable value of free/cheap services that are provided by the ER?
Value =
- cost for other services
- lowest ticket price ito travel facilities.
47
What is a subsidy?
When ER pays a subsidy amount iro capital/interest on behalf of the EE to a 3rd party.
48
How will the following be treated?
| : amount paid by ER + interest paid by EE < amount using official interest rate
The amount paid by the ER will be treated as a low interest loan.
49
How will the following be treated?
| : amount paid by ER + interest paid by EE > amount using official interest rate
The amount paid by the ER will be treated as a subsidy - amount will be taxable.
50
What is the FB ito discharge/release of obligation?
The FB = amount paid by ER for releasing the EE from an obligation.
51
What is the benefit ito medical aid contributions?
Benefit = cash equivalent = amount of the ER's contributions to the medical aid fund.
52
What is the benefit ito costs relating to medical services?
Benefit = amount of costs incurred by ER iro:
- medical, dental, etc..
- hospital/nursing
- medicines
53
When will cost relating to medical services be excluded?
When the ER has their own medical aid scheme
| When the benefit is for a retired EE.
54
What is the FB ito contributions to retirement funds?
The Benefit = amount contributed by the ER
55
What is the annual exclusion for natural persons?
R40 000 annually
| R300 000 in year of death.
56
When do we calculate CGT and on what assets when a person dies?
CGT is calculated on the day of death and is calculated on all of the assets.
57
How many TP are there when a person dies?
2
- TP
- Deceased estate.
58
List the different exclusions ito CG/CL for individuals.
- Primary residence exclusion.
- Personal-use assets
- Compensation payments
- Donations to PBO
- Gambling, games and competitions.
59
Explain the general rule and principles for primary residence exclusions.
The primary residence exclusion is applicable to NP only.
The TP does not have to own the house - interest.
Only 1 @ a time.
- If P<2mil --> disregard the whole G/L (if it is a primary residence held for whole time from 1 Oct 2001)
- If P>2mil --> disregard 2mil of G/L
60
What is a residence?
Any structure used as a place of residence.
| Includes any appurtenance.
61
What is a primary residence?
```
A residence
NP has an interest in
Person/spouse:
- ordinarily resides in.
- used mainly for domestic purposes.
```
62
Explain what a deemed ordinarily resident is.
You are a deemed ordinarily resident while the residence is still in your name.
Regardless of you not being able to live their.
63
Explain what deemed ordinarily residential use.
When all of the following requirements are met:
- absent from house for 5years/less
- house is let out during that time
- stayed in house @ least 1 year before and after
- had no other primary residence during period
- was in another country/ 250+ km away
64
What is the principle of a personal-use asset ito CGT?
NP must disregard any CG/CL on the disposal of a personal-use asset
65
What is a personal-use asset?
Asset owned by NP used mainly for purposes other than carrying on a trade
66
What items are excluded from personal-use assets?
- coins made from gold/plat
- immovable property
- fin instruments
- ST insurance policies over non-personal use assets
- LT insurance contracts
67
Are the excluded personal use items subject to normal CGT?
Yes
68
What items are excluded from personal-use assets and are subject to a loss limitation?
- Aircraft with empty mass > 450kg
- Boat length > 10m
- Any fiduciary interest
- Time share
69
Explain what the principle of a loss limitation is.
Person must disregard any LOSS on the disposal of these non-personal-use assets.
(still need to account the Gain for CGT purposes)
70
Explain the principle of compensation payments.
NP disregard any CG/L upon the receipt of compensation for personal injury/illness/defamation
Why: restoring a loss
71
Explain the principle of Gambling, games and competitions.
All capital LOSSES must be disregarded.
Gains are only disregarded when:
- NP
- is conducted ito SA Laws
Thus, foreign winnings and company winnings = subject to CGT
72
What can an individual deduct for tax purposes?
Sole prop - all deductions
| Not SP then there are limited deductions
73
List the deductions that individuals qualify for.
- expenses iro employment
- home study
- deductions iro retirement fund contributions
- donations to universities, etc.
74
When will a home study deduction be allowed?
- if the study is equipped for the trade of EE
- is ito the employment contract
- regularly + exclusively used
- EE's income = mainly from commission and no office is provided; or
- EE's duties are mainly performed in his study
75
What can the EE deduct ito a home study?
The amount is ito the floor ratio used when deducting:
- rental paid
- interest on bond
- repairs on HOUSE
- rates and taxes
EE can also deduct under certain sections
* apportion amount ito the months worked!
76
How will the deduction be calculated for contributions to a retirement fund?
Deduction = Lessor of:
- R350 000
- 27,5% of HIGHER of:
* remuneration
* TI before this deduction
- TI before this deduction + Taxable CG
* deduction is limited to the total contribution!
77
How is the remuneration calculated?
amount =
remuneration for current year + FB;
(only 80% of travel allowances/comp car)
NO subsistence allowance
78
Explain what a contribution is.
Contributions are:
- excess deductions from prev. years
- own contribution in current year
- ER contributions that are FB for current
79
Explain the concept "tax per table" and
| "Tax payable"
Tax per table is the amount of tax that an individual will pay based on their Taxable Income.
It is according yo the TAX TABLE
The amount determined = Tax payable
80
What amounts will be deducted from Tax payable?
- rebates
| - credits
81
What credits, rebates, etc. are deducted against Tax payable?
- primary (all), secondary (>65) and tertiary (>75) rebates
- medical rebates
- taxes already paid (by ER + Prov tax)
- medical/dental/other health expenses
82
Explain the 2 parts of medical/other expense.
Section 6A = contributions to Medical Aid Schemes
| Section 6B = for qualifying expenses that are not covered by medical aid scheme
83
What is the amount of deductions for TP that contributes to a Medical Aid scheme
(Part A)
* R319 pm for TP
* R638 pm for TP + D
* R215 pm for each additional D
84
What are the 3 categories ito Qualifying expenses?
| Part B
- TP < 65 w/o fam disabilities
- TP > 65
- TP that has fam with disabilities
85
Explain how the deduction is calculated for a TP < 65y w/o disabilities.
(Part B)
1) Determine contributions (total)
2) Amount of medical aid scheme tax credit (Part A) x 4
3) Subtract 2 from 1 (1-2)
4) Calculate the qualifying medical expenses + Step 3
5) (4) - 7.5%xTI
6) Sub-total x 25%
= deduction
86
Explain how the deduction is calculated for a TP > 65y / disabilities.
1) Determine contributions (total)
2) Medical aid scheme tax credit x 3
3) 1-2
4) Sub-total x 33,3%
= deduction!
87
Explain how the deduction is calculated for a TP > 65y / handicapped
1) Determine contributions (total)
2) Medical aid scheme tax credit x 3
3) 1-2
4) Sub-total x 33,3%
5) Calculate qualifying medical expenses
6) Sub-total x 33,3%
= DEDUCTION
