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Taxation 200 > Individuals > Flashcards

Individuals Flashcards

1
Q

How are minor children taxed?

A

In their own name.

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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.

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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
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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
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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
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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.

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7
Q

What are the rules ito bursary exemptions for an employee?

A
  • Employee= must agree to reimburse employer if fail to complete
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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
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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

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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.
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11
Q

What are the 2 types of travel allowances?

A
  • allowances iro transport expenses

- motor car allowances

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12
Q

What is the taxable portion of travel allowances?

A

The portion of the allowance that is expended for private travel.

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13
Q

How is business use calculated, ito travel allowances?

A

Business use =

business km’s x cost per km

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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

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15
Q

How is the value of the vehicle determined?

A

1) Cost (incl VAT)
2) MV + VAT
3) Sale price + VAT

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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.

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17
Q

What is the simplified method for reimbursive travel allowance?

A

398c per km

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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.
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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
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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.

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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.
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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.
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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.

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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.
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25
Q

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?

A
  • value of the house < 450 000
  • remuneration proxy of EE < 250 000
  • EE should not be a connected person
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26
Q

What is a right-of-use asset?

A

When EE is granted the right to use and asset for private/domestic purposes, for free/

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27
Q

How is the value of a right-of-use asset determined?

A

15% per year x lower of:
- MV
- Cost
x part of year it is used by EE

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28
Q

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?

A

The COST to ER will always be used.

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29
Q

What is the benefit when EE has right to use motor vehicle?

A

Benefit = value of private use - consideration paid.

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30
Q

What is the value of private use?

right of use vehicle

A

= Determined value of the vehicle

= cost + VAT

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31
Q

What will the value of private use be if the vehicle is owned by the ER?

A
  • value x 3,5% pm
    OR
  • value x 3,25% pm (if maintenance plan)
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32
Q

What happens when the EE receives a second hand car?

A

The value of the vehicle will be reduced by 15% for each completed year.

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33
Q

What happens when the EE receives the right to use more than 1 vehicle?

A

Then the vehicle with the highest taxable value will be used.

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34
Q

When will the private use value be reduced?

A

When:

  • EE has accurate records of the business km’s.
  • EE has paid certain costs
  • EE paid fuel for private trips.
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35
Q

What are the exclusions of a right of use vehicle?

A
  • 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
Q

What is the benefit for meals, refreshments and refreshment voucher?

A 
Benefit = value less consideration paid by employee.
value = cost to employer of providing it.
37
Q

What are the exclusions ito meals, refreshments and -vouchers?

A
  • annual lunches
  • provided during extended working hours
  • canteen that is used by all EE.
38
Q

What is the benefit for residential accomodation?

A

Benefit = value less consideration paid by EE

contributions to rental

39
Q

How is the value determined?

residential accommodation

A

Value:

1) Formula
2) lower of formula/cost
3) par 9(4) amount iro holiday accommodation
4) Low interest loan

40
Q

How is the formula used in determining the value of residential accomodation?

A

(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
Q

What is the value of the residential accommodation when it is rented out?

A

It is the lower of the:

  • formula
  • rent ER + expenses defrayed by ER
42
Q

What is the value of residential accommodation iro Holiday residence?

A

Value =
Cost incurred by ER if hired by ER
OR
normal daily rate per person

43
Q

What are the exception ito residential accommodation?

A
  • 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
Q

How to calculate the FB for a low interest rate loan received by the EE?

A

Benefit = interest on loan @ official rate - Interest paid by EE

45
Q

What is free or cheap services?

A

Services received by the EE for free or less than the cost to the employee.

46
Q

What is the taxable value of free/cheap services that are provided by the ER?

A

Value =

  • cost for other services
  • lowest ticket price ito travel facilities.
47
Q

What is a subsidy?

A

When ER pays a subsidy amount iro capital/interest on behalf of the EE to a 3rd party.

48
Q

How will the following be treated?

: amount paid by ER + interest paid by EE < amount using official interest rate

A

The amount paid by the ER will be treated as a low interest loan.

49
Q

How will the following be treated?

: amount paid by ER + interest paid by EE > amount using official interest rate

A

The amount paid by the ER will be treated as a subsidy - amount will be taxable.

50
Q

What is the FB ito discharge/release of obligation?

A

The FB = amount paid by ER for releasing the EE from an obligation.

51
Q

What is the benefit ito medical aid contributions?

A

Benefit = cash equivalent = amount of the ER’s contributions to the medical aid fund.

52
Q

What is the benefit ito costs relating to medical services?

A

Benefit = amount of costs incurred by ER iro:

  • medical, dental, etc..
  • hospital/nursing
  • medicines
53
Q

When will cost relating to medical services be excluded?

A

When the ER has their own medical aid scheme

When the benefit is for a retired EE.

54
Q

What is the FB ito contributions to retirement funds?

A

The Benefit = amount contributed by the ER

55
Q

What is the annual exclusion for natural persons?

A

R40 000 annually

R300 000 in year of death.

56
Q

When do we calculate CGT and on what assets when a person dies?

A

CGT is calculated on the day of death and is calculated on all of the assets.

57
Q

How many TP are there when a person dies?

A

2

  • TP
  • Deceased estate.
58
Q

List the different exclusions ito CG/CL for individuals.

A
  • Primary residence exclusion.
  • Personal-use assets
  • Compensation payments
  • Donations to PBO
  • Gambling, games and competitions.
59
Q

Explain the general rule and principles for primary residence exclusions.

A

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
Q

What is a residence?

A

Any structure used as a place of residence.

Includes any appurtenance.

61
Q

What is a primary residence?

A 
A residence 
NP has an interest in 
Person/spouse:
- ordinarily resides in.
- used mainly for domestic purposes.
62
Q

Explain what a deemed ordinarily resident is.

A

You are a deemed ordinarily resident while the residence is still in your name.
Regardless of you not being able to live their.

63
Q

Explain what deemed ordinarily residential use.

A

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
Q

What is the principle of a personal-use asset ito CGT?

A

NP must disregard any CG/CL on the disposal of a personal-use asset

65
Q

What is a personal-use asset?

A

Asset owned by NP used mainly for purposes other than carrying on a trade

66
Q

What items are excluded from personal-use assets?

A
  • coins made from gold/plat
  • immovable property
  • fin instruments
  • ST insurance policies over non-personal use assets
  • LT insurance contracts
67
Q

Are the excluded personal use items subject to normal CGT?

A

Yes

68
Q

What items are excluded from personal-use assets and are subject to a loss limitation?

A
  • Aircraft with empty mass > 450kg
  • Boat length > 10m
  • Any fiduciary interest
  • Time share
69
Q

Explain what the principle of a loss limitation is.

A

Person must disregard any LOSS on the disposal of these non-personal-use assets.
(still need to account the Gain for CGT purposes)

70
Q

Explain the principle of compensation payments.

A

NP disregard any CG/L upon the receipt of compensation for personal injury/illness/defamation
Why: restoring a loss

71
Q

Explain the principle of Gambling, games and competitions.

A

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
Q

What can an individual deduct for tax purposes?

A

Sole prop - all deductions

Not SP then there are limited deductions

73
Q

List the deductions that individuals qualify for.

A
  • expenses iro employment
  • home study
  • deductions iro retirement fund contributions
  • donations to universities, etc.
74
Q

When will a home study deduction be allowed?

A
  • 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
Q

What can the EE deduct ito a home study?

A

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
Q

How will the deduction be calculated for contributions to a retirement fund?

A

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
Q

How is the remuneration calculated?

A

amount =
remuneration for current year + FB;
(only 80% of travel allowances/comp car)
NO subsistence allowance

78
Q

Explain what a contribution is.

A

Contributions are:

  • excess deductions from prev. years
  • own contribution in current year
  • ER contributions that are FB for current
79
Q

Explain the concept “tax per table” and

“Tax payable”

A

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
Q

What amounts will be deducted from Tax payable?

A
  • rebates

- credits

81
Q

What credits, rebates, etc. are deducted against Tax payable?

A
  • primary (all), secondary (>65) and tertiary (>75) rebates
  • medical rebates
  • taxes already paid (by ER + Prov tax)
  • medical/dental/other health expenses
82
Q

Explain the 2 parts of medical/other expense.

A

Section 6A = contributions to Medical Aid Schemes

Section 6B = for qualifying expenses that are not covered by medical aid scheme

83
Q

What is the amount of deductions for TP that contributes to a Medical Aid scheme
(Part A)

A
  • R319 pm for TP
  • R638 pm for TP + D
  • R215 pm for each additional D
84
Q

What are the 3 categories ito Qualifying expenses?

Part B

A
  • TP < 65 w/o fam disabilities
  • TP > 65
  • TP that has fam with disabilities
85
Q

Explain how the deduction is calculated for a TP < 65y w/o disabilities.
(Part B)

A

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
Q

Explain how the deduction is calculated for a TP > 65y / disabilities.

A

1) Determine contributions (total)
2) Medical aid scheme tax credit x 3
3) 1-2
4) Sub-total x 33,3%
= deduction!

87
Q

Explain how the deduction is calculated for a TP > 65y / handicapped

A

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

Taxation 200 (9 decks)

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