Tax 3: Specific deductions, Medical rebates, Married persons and SBCs Flashcards
What are the SPECIFIC deductions? (8) [i.e. non-general]
- legal expenses
- wear & tear allowance
- restraint of trade payments
- pension fund contributions
- RA fund contributions
- contributions made by employer to pension/RA funds
- shares granted to employee iro BBE share plan
- annuities paid by employer to FORMER employees
- key-man insurance premiums paid by employer
- donations to PBO
When will legal fees be eligible for a specific deduction?
- did not qualify for the general deduction (difficult to prove)
- incurred as part of taxpayer’s TRADE
- claimed amount is taxable (win) or tax deductible (lose)
- NOT of capital nature!
What are examples of deductible legal expenses?
- fees for legal practitioners
- court fees
- witness & expert fees
What is a restraint of trade payment?
amount incurred by a person in carrying on a trade as COMPENSATION iro a restraint of trade IMPOSED ON another person [i.e. gross income for that person]
How is a restraint of trade payment deduction determined?
LESSER of:
*amount/# of yrs of restraint; OR
*amount/3 yrs
[no apportionment!]
If you are NOT a member of a ______ fund, you only have _______ income.
pension/provident; NON-RFE [‘non-retirement funding employment income]
True/False: The excess of the monthly pension fund contributions may NOT be carried over to the following year.
True, but it is carried over to RETIREMENT! Only excess RA fund contributions may be carried over to the next year.
What is RFE?
Retirement Funding Employment. Also called pensionable earnings. Whatever amount employer uses to determine your pension contribution.
What are two types of contributions to Pension, Provident or RA funds and what is the difference?
- Current: monthly contributions paid
2. Arrears: to reinstate membership of fund/buy-back service
True/False: Excess of ARREARS contributions may NOT be carried over to next year.
False, it MAY be carried over to next year, the same as the excess on RA contributions.
What is the annual deduction for arrears pension fund contributions?
R1 800
What is the annual deduction for current pension fund contributions?
the GREATER of:
– 7.5% x remuneration of RFE (i.e. pensionable earnings)
– R1 750
[no apportionment]
True/False: Excess RA fund deductions MAY be carried over to next year.
True.
What is the deduction for current RA fund contributions?
GREATER of:
- R1 750
- R3 500 less pension fund deduction (if applicable)
- 15% of non-RFE income (anything other than pensionable earnings).
For pension/RA/provident fund contribution deductions: the deduction is limited to ________.
actual contributions [i.e. can’t deduct more than the contributions]
What are the 2 types of medical rebates?
- medical SCHEME FEES tax credit
* medical EXPENSE tax credit
Who qualifies for the medical scheme fees tax credit?
Everyone – as long as a member of a medical scheme/aid
When is someone a dependent iro of medical tax credit?
When so defined by the medical scheme
What is medical expense tax credit?
All excess, out-of-pocket (qualifying) expenses paid by taxpayer e.g. prescription drugs
What is a qualifying medical expense?
An amount actually PAID (not only incurred)
which was not recovered from medical aid
for PRESCRIBED medicine (not OTC)
NECESSARILY incurred
in CONSEQUENCE of
physical impairment or disability
The employer’s contribution to a medical aid is a __________ which is included in the ________’s _____ income.
fringe benefit; employee’s; gross
How would a medical rebate be dealt with when a person dies?
Deemed paid by such person the day BEFORE death.
If a child is not seen as dependent by medical aid, how is the dependence tested for tax purposes?
Any child, adopted or step:
- 18 yrs or younger, unmarried
- 21 yrs or younger, unmarried, dependent
- 26 yrs or younger, unmarried, dependent, full-time student
- disabled [no restriction]
How is the “excess” defined i.r.o. medical scheme fees?
Amount by which the medical scheme fees paid by the taxpayer to a medical aid EXCEEDS the MSFTC – limited to NIL.
