Week 12 - Individuals Flashcards
format for calculating taxable income?
gross income special inclusions exemptions INCOME deductions capital allowances trading stock SUBTOTAL 1 capital gains SUBTOTAL 2 retirement fund deduction (11F) donations deduction (18A) TAXABLE INCOME tax per tables rebates - 6, 6A, 6B NORMAL TAX LIABILITY
three categories of individuals?
- carrying on a business / sole proprietor
- employee
- earning only passive income
limitations for employees?
- deductions are limited by s23(m)
- no limit if they have a business on the side, view them as separate
- no limit if they earn mainly commission (>50% of their remuneration is derived from)
limitations for sole proprietors?
none, can claim all deductions
limitations for individuals who earn only passive income?
- deduction depends on type of passive income
- rent and royalty income usually deductible
- interest and dividend not = trade, no deduction
section 23(m)?
applies to employees who earn remuneration from their employers and states which deductions and allowances are allowed to be claimed against their employment
deductions allowed for employed individuals?
(must relate to their employment)
- pension, provident, retirement annuity fund contributions by employer
- legal expenses
- s11e allowance
- bad and doubtful debts
- repayment of employee benefits
- any deduction in respect of exp in connection with domestic premises which are not disallowed under s23b
when does s23(m) not apply?
if the person is an agent/rep whose income is normally derived from commission based on sales. (>50%). they are treated as a sole proprietor and are entitled to all deductions and allowances subject to the provisions of s23.
what is the s11F deduction?
deduction against your salary for contributions made by you to a pension, provident or retirement annuity fund
contributions made by employer i.t.o. s11F?
- treated as a fringe benefit and specially included
- then employee can claim a s11F deduction on the amount as it is deemed that the employee made the contribution
- aggregate with employee contributions when looking at actual contributions made for the purpose of 11F
limitations for s11F deductions?
limited to the lesser of:
1) 350 000
2) 27,5% of the higher of remuneration or taxable income before s11F and s18A
3) taxable income before s11F, s18A, any taxable capital gains
disallowed portion of contributions?
carried forward to the next year and treated as contributions made during that YOA
remuneration definition?
any amount of income which is paid/payable to any person by way of any salary, wage, etc, whether in cash or otherwise and whether or not in respect of services rendered
what is a rebate?
a reduction in tax payable and only applies to individuals
s6 normal tax rebate amounts?
under 65 - R14 958
over 65 - R8 199
over 75 - R2 736
s6 normal tax rebate details?
- apportionment allowed only for death, birth, insolvency
- not becoming/ceasing to be a resident
if a person died before they turned 65?
if they would have turned 65 before the end of the YOA, they will be allowed both p&s rebates. however, both rebates will be apportioned for number of months they were alive.
what is a tax threshold?
- point at which an individual starts paying tax; dependent on their age
who receives the s6A medical scheme tax credits?
individuals who belong to a medical aid and who makes contributions during the YOA
s6A medical scheme tax credits calculations?
- R319 for 1 member
- R638 (2 x 319) for taxpayer + dependent
- R215 for each additional dependent
(apportion for months they contribute)
s6A rules for employer contributions?
- contributions will be seen as a fringe benefit and will be specially included into GI
- because they will be taxed on this amt, the employer contributions will be deemed to have been made by the employee and they will get a 6A rebate
who receives s6B medical expenses tax credits?
- individuals who have incurred and paid qualifying medical expenses
- do not have to belong to a medical scheme
three scenarios for s6B?
- 65 and older
- under 65
- with a disability, or spouse or child is disabled
for whom can qualifying medical exp be incurred?
can be incurred for the taxpayer AND/OR their dependent
what is a dependent?
- spouse
- child
- child of a spouse
child?
any individual who was alive during any portion of the YOA and who on the last day of the YOA was:
- unmarried and was not:
> older than 18
> older than 21; dependent wholly/partly on taxpayer for maintenance; not liable to pay normal tax in YOA
> older than 26; dependent wholly/partly on taxpayer for maintenance; not liable to pay normal tax in YOA; full-time student at education institute
qualifying medical expenditure examples?
- services rendered / medicine supplied
- hospitalization
- home nursing by an RN
- prescribed medicines
etc etc
format for taxpayers under 65?
medical aid contributions less 4 x 6A medical aid credit Qualifying contributions add qualifying medical expenses Subtotal less 7.5% of taxable income Subtotal defined credit rate = 25% Medical expenses tax credit
format for taxpayers over 65 / disabled?
medical aid contributions less 3 x 6A medical aid credit Qualifying contributions add qualifying medical expenses Subtotal defined credit rate = 33.3% Medical expenses tax credit
what is disability?
- moderate to severe limitation of a person’s ability to function / perform daily activities as a result of physical, sensory, intellectual impairment, if limitation:
> has lasted / will last more than a year
> is diagnosed by a duly registered medical practitioner in accordance with the Commissioner’s prescribed criteria
if taxpayer has a disabled spouse / child?
can claim s6B as if they themselves were disabled
