Learning Unit 3 - Specific inclusions

Question 1

What principle was established in Kommissaris van Binnelandse Inkoste en ‘n Ander v Hogan 55 SATC 329 in terms of the treatment of annuities?

Answer 1

If the person gives up a right to be paid a capital amount that would not under normal circumstances be subject to ordinary tax in return for the payment of an annuity, the capital status of the amount payable will be lost and the annuity will become revenue in nature (gross income).

Question 2

Is money received in respect to a capital debt that is paid in instalments considered as being a annuity?

Answer 2

No. The periodic liquidation of a debt, even if it is in instalments may vary depending on the circumstances, do not constitute an annuity.

Question 3

Are retirement fund lump sum benefits or retirement fund lump sum withdrawal benefits included under gross income?

Answer 3

Paragraphs (e) and (eA) of the definition of gross income include the taxable amounts received or accrued in respect of approved retirement funds including a retirement fund lump sum benefits in gross income.

Question 4

Are restraint of trade payments included under gross income?

Answer 4

Restraint of trade payments would be of a capital nature. These payments limit the use by the recipient of their skills, knowledge or business contracts to earn income for a specified number of years.