Unit 1 - Individuals - Deductions Flashcards
Deductions:
What is S23(m)
Prohibits deductions of expenditure relating to employment/holding of office unless specifically allowed in this section.
- Applies to EE/holders of office who receive remuneration
- NOT applied to:
Agents/rep whose remuneration = form of commission based on sales/turnover
What deductions are allowed under S23(m) - Expenditure related to employment
S11F - Contributions to pension fund, provident fund/ RA fund
S11(c) - Legal Expenses
S11(e) - Wear & tear allowances
S11(i) - Bad debts allowance.
S11(j) - Doubtful debts allowance
S11(nA) & 11(nB) - refund of persons salary/restraint of trade pmt received
S11(a)/(d) - Rent of/repairs of/expenses in connection with domestic premises which are not disallowed under S23(b) - Private/domestic expenditure
Deductions:
What deductions are allowed under S11F - Pension, Provident & RA Fund contributions
By individuals that is a member of the relevant fund.
Contribution limit = lessor of:
- (a) R350,000.
- (b) 27.5% of the higher of:
Remuneration or Taxable income - (c) Taxable income BEFORE
S11F deduction, S6quat(1C) deduction & S18A deduction &
Inclusion of any taxable capital gain
Remuneration in (b) excl SB, WB & LS form retirement funds
Taxable income in (b) excl SB, LS & WB from retirement funds, & is taxable income BEFORE
S11F deduction, S6quat(1C) deduction & S18A deduction &
But incl. any taxable capital gain
Taxable income in (c)
Excl capital gains & SB & LS from retirement funds
What is deductible under S11F(3)
- Amounts disallowed under s11(n), 11(k)
or 11F - in any previous YoA is carried forward & -
- allowed for deduction in later year unless
deducted under any section in any
previous year of assessment/reduced
any LS benefit under 2nd Schedule/ has
been taken into account in calc. amounts
exempt under s10C - qualifying annuities
Subject to the limits.
What is deductible under S11F(4)
EE may only claim a deduction if ER’s contributions to retirement fund was incl. in EE income for tax purposes
If ER has contributed to retirement fund, EE is deemed to have contributed an amount = to value of fringe benefit (arising from ER contribution)
What is deductible under S11F(5)
Deems a partner to be an EE of a partnership. Only for purposes of S11F
Partnership = ER
What are the steps to calc. S11F deduction
Step 1: Calc persons Taxable income BEFORE
S11F deduction, S6quat(1C) deduction & S18A deduction &
Inclusion of any taxable capital gain - (c) as per flash card 3. = Fig. A
Step 2: Calc person Taxable income same as Step 1 but now include taxable portion of any capital gains. = Fig. B
Step 3: Calc persons Remuneration. Fig. C
Step 4: 27.5% X higher of Fig. B & C = Fig. D
Step 5: Take lessor of R350,000, Fig. A, or D = S11F deduction limit
Step 6: Any excess contribution disallowed must be carried forward to next YoA.
What deductions are allowed under S18A - Donations to PBO
Deduction iro sum of bona fide donations of cash/property during YoA, to:
- PBO/other institution approved by CSARS to issue s18A receipts, & must issue a tax deduction receipt to donor
- 10% limit of taxable income BEFORE deductions under this section & excl. taxable income from retirement LSB/WB & SB. Incl portion of any capital gains.
Any disallowed portion is carried forward to next YoA.
Deductions with regards to divorced persons
S21 only applies to divorces/judicial separations which took place BEFORE 21 March 1962
:. Any alimony, allowance/maintenance pd to spouse, former spouse/children could be deducted from paying spouse’s taxable income.
TP could noy create a assessed loss w/ deduction of alimony pmts, excess not deductible falls away.
Deductions:
What 2 categories fall under medical expense tax credit
- Contributions to medical aid scheme = S6A
- Out-of-pocket medical expenses i.e. QUALIFYING MEDICAL EXPENSES. = S6B
What deduction falls under S6A - medical expense tax credit
Rebate may be claimed known as “medical scheme fee tax credit” by natural persons who make contributions to registered SA/Foreign medical scheme.
= R364 - member
= R728 - member + 1 Dependent
= R728 - member + 1 dependent, + additional R246 iro each additional dependent.
Amounts are p.m
What is deductible under S6A(3A)
Calc:
Total amount of credit for that person X (Contribution by TP/Total contributions to fund for that person).
Where >1 person pays any fees to a medical scheme iro benefits to a person/dependent.
Additional S6A notes
- Rebates are only claimable for those months iro which contributions are actually pd to medical scheme.
- Medical scheme pd by deceased estate = deemed to have been pd by person on day BEFORE death.
- Where contributions have been pd by ER and taxed as fringe benefit = deemed to have been pd by EE.
What is deductible under S6B - Additional medical expenses tax credit
It is an additional tax credit rebate for natural persons who paid for qualifying medical expenses.
Define qualifying medical expenses ito s6B(1)?
All amounts pd by a person during YoA to any:
- Medical practitioners, dentists, etc, for
services/medicines, nursing homes,
hospitals, nurses iro illness/confinement,
and pharmacists for medicines on
prescription.
- Amounts pd by persons outside of R that
are similar to the above.
- Expenditure necessarily incurred & pd in
consequence of any physical
impairment/disability of TP/dependents.
