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2021 - Tax 1 > Week 12 - Individuals > Flashcards

Week 12 - Individuals Flashcards

1
Q

format for calculating taxable income?

A 
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
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2
Q

three categories of individuals?

A
  • carrying on a business / sole proprietor
  • employee
  • earning only passive income
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3
Q

limitations for employees?

A
  • 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)
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4
Q

limitations for sole proprietors?

A

none, can claim all deductions

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5
Q

limitations for individuals who earn only passive income?

A
  • deduction depends on type of passive income
  • rent and royalty income usually deductible
  • interest and dividend not = trade, no deduction
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6
Q

section 23(m)?

A

applies to employees who earn remuneration from their employers and states which deductions and allowances are allowed to be claimed against their employment

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7
Q

deductions allowed for employed individuals?

A

(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
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8
Q

when does s23(m) not apply?

A

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.

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9
Q

what is the s11F deduction?

A

deduction against your salary for contributions made by you to a pension, provident or retirement annuity fund

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10
Q

contributions made by employer i.t.o. s11F?

A
  • 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
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11
Q

limitations for s11F deductions?

A

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

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12
Q

disallowed portion of contributions?

A

carried forward to the next year and treated as contributions made during that YOA

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13
Q

remuneration definition?

A

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

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14
Q

what is a rebate?

A

a reduction in tax payable and only applies to individuals

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15
Q

s6 normal tax rebate amounts?

A

under 65 - R14 958
over 65 - R8 199
over 75 - R2 736

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16
Q

s6 normal tax rebate details?

A
  • apportionment allowed only for death, birth, insolvency

- not becoming/ceasing to be a resident

17
Q

if a person died before they turned 65?

A

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.

18
Q

what is a tax threshold?

A
  • point at which an individual starts paying tax; dependent on their age
19
Q

who receives the s6A medical scheme tax credits?

A

individuals who belong to a medical aid and who makes contributions during the YOA

20
Q

s6A medical scheme tax credits calculations?

A
  • R319 for 1 member
  • R638 (2 x 319) for taxpayer + dependent
  • R215 for each additional dependent
    (apportion for months they contribute)
21
Q

s6A rules for employer contributions?

A
  • 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
22
Q

who receives s6B medical expenses tax credits?

A
  • individuals who have incurred and paid qualifying medical expenses
  • do not have to belong to a medical scheme
23
Q

three scenarios for s6B?

A
  • 65 and older
  • under 65
  • with a disability, or spouse or child is disabled
24
Q

for whom can qualifying medical exp be incurred?

A

can be incurred for the taxpayer AND/OR their dependent

25
Q

what is a dependent?

A
  • spouse
  • child
  • child of a spouse
26
Q

child?

A

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

27
Q

qualifying medical expenditure examples?

A
  • services rendered / medicine supplied
  • hospitalization
  • home nursing by an RN
  • prescribed medicines
    etc etc
28
Q

format for taxpayers under 65?

A 
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
29
Q

format for taxpayers over 65 / disabled?

A 
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
30
Q

what is disability?

A
  • 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
31
Q

if taxpayer has a disabled spouse / child?

A

can claim s6B as if they themselves were disabled

2021 - Tax 1 (15 decks)

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