NATURAL PERSONS

SILKE: SOUTH AFRICAN INCOME TAX 2023: CHAPTER 7

Mr Azmatullah Latief
Room 4.03 4th Floor EMS Building
azlatief@uwc.ac.za
 FRAMEWORK
R’s
Gross Income (as defined in section 1 - including special inclusions) Xxxx

Add: Deemed inclusions in ‘income’ , for example section 7 and section 8(4)(a) Xxxx

Less: Exempt Income s10 and s10A (xxxx)

Xxxx
Income
Less: Deductions (all s11 and other deductions except s11F ) (xxxx)

Less: Assessed Loss s20 (xxxx)

Add: Other Taxable Allowances (s8(1) – s8(5)) xxxx

Xxxx
Add: Taxable Capital Gain s26A
SUBTOTAL Xxxx

Less: s11F CONTRIBUTIONS TO ANY Pension Fund, Provident Fund and Retirement Annuity Fund (xxxx)

SUBTOTAL Xxxx

Less: Donations s18A (xxxx)

TAXABLE INCOME Xxxx

 INTRODUCTION
• Individual taxpayers are taxed in the same way as any other
person.

• However, special provisions have been inserted into the Act

for individual taxpayers.

• Individual taxpayers are subject to tax on a sliding scale.

 INCOME - SALARY
• Gross Income
- Amounts are either included in Gross Income via the
general definition or special inclusion.

- Paragraph (c) of the Gross Income definition deems all

amounts received in respect of services rendered or to
be rendered, or in respect of (or by virtue of
employment) to be gross income
• The reason for the payment must be because of services rendered
• Causal link between the service and the payment
 RECAP
• Gross Income
• Residents are taxed on their world wide income
• Non Residents taxed on SA source income (s9)

• Special Inclusions in Gross Income

• Alimony
• Services Rendered
• Restraint of Trade
• Variation of Office
• Fringe Benefits
• Dividends
• Recoupment
 RECAP
• Exemptions
• Local Interest – s10(1)(i)
• Dividends – s10(1)(k) and s10B & s 10B(2)
• Non residents receiving Interest – s10(1)(h)
• Bursaries and Scholarships – s10(1)(q) and (qA)
• Purchased Annuities – s10A

• Deductions
• Limited by s23(m)
• And also all other s23’s
 S23(M)- LIMITATION OF DEDUCTIONS
• Salaried employees – s23(m)
- Persons earning remuneration
- Are only entitled to the following deductions related to
employment:
• Benefit Funds – s11F
• Legal expenses – s11(c)
• Bad and doubtful debts – s11(i)
• Wear and tear – s11(e)
• Loss of income insurance policy premiums

However S23(m) does not apply if a person is an agent or a

representative
• who normally derives income mainly from commission based
sales or turnover.
 DEDUCTIONS
(RELATED TO EMPLOYMENT)

Pension Fund
S11F
Contribution

Retirement
Deductions S11F
Annuity Fund

Provident
S11F
Fund
 TAXABLE INCOME FRAMEWORK
NORMAL TAX

Taxable Income XXX

Tax per the tax tables (based on Taxable Income and Tax XXX
Tables)

Rebates (s6 – primary, secondary and tertiary) (XXX)

Rebates (s6A) (XXX)

Rebates (s6B) (XXX)

Normal Tax XXX

 S11F – RETIREMENT FUND
DEDUCTIONS
• What is a Retirement fund?

• Deductions
 S11F – RETIREMENT FUND
DEDUCTIONS
• Actual Contributions ltd to the lesser of:
1) R 350 000
OR
2) 27.5% of the higher of:
-Remuneration as defined in paragraph 1 of the 4th Schedule(Excluding
retirement or severance lump sum benefits)
or
-Taxable Income(Excluding retirement or severance lump sum benefits) before
the s18A deduction
OR
3) The taxable income of that person before—
(i) allowing any deduction under this section; and
(ii) the inclusion of any taxable capital gain.

• Any excess contributions are carried forward to the next year

 S11F – RETIREMENT FUND
DEDUCTIONS
Remuneration

- Basically includes salaries and wages.

- Things that you receive from an employer
 LECTURE EXAMPLE 1
During the 2023 year of assessment, Mr Hardhat was employed by Construction Ltd. He earns a
salary of R600 000 per year and contributes R18 000 per month to the company’s pension fund.

Calculate his s11F Benefit fund deduction for the 2023 year of assessment.

Solution
• s11F Benefit fund deduction:
• Actual contribution R18 000 x 12 = R216 000
• Limited to the lesser of
• R350 000 and
• 27.5% of the higher of:
• Remuneration – 600 000 = 27.5% X 600 000 = 165 000
• Taxable Income before s18A – In this case the same as remuneration
• Taxable income before any capital gains = 600 000

• Therefore s11F retirement fund deduction is limited to R165 000

• The remaining R 51 000 is carried forward to be deducted next year.
 LECTURE EXAMPLE 2
PART A
During the 2023 year of assessment, Zayne was employed by
Multi-direction (Pty) Ltd. His cost of employment is R180 000
per year and he had no other form of income.
He contributes R1 100 per month to the company’s pension
fund and in order to save enough for his retirement, Zayne
contributes R500 per month to a retirement annuity fund.

Calculate the relevant deductions for Zayne in the 2023 year of

assessment.
 LECTURE EXAMPLE 3
Solution – PART A

• s11F Benefit fund deduction:

• Actual contribution (R1 100 x 12) + (R 500 x 12) = R 19 200

Limited to the Lesser of

• R350 000 and
• 27.5 % of the higher of :
• Remuneration – 180 000 = 27.5% X 180 000 = 49 500
• Taxable Income before s18A – In this case the same as
remuneration
• Taxable income before any capital gains- in this case 180 000

• Therefore s11(F) Retirement fund deduction is R19 200

 LECTURE EXAMPLE 3
PART B

During the 2023 year of assessment, Zayne was employed by

Multidirection (Pty) Ltd. His cost of employment is R180 000 per year and
he earned other income of R50 000. He contributes R1 100 per month to
the company’s pension fund and in order to save enough for his
retirement, Zayne contributes R500 per month to a retirement annuity
fund.

Calculate the relevant deductions for Zayne in the 2023 year of

assessment.
 LECTURE EXAMPLE 3
Solution – PART B

• s11F Benefit fund deduction:

• Actual contribution (R1 100 x 12) + (R 500 x 12) = R 19 200

Limited to the Lesser of

• R350 000 and
• 27.5 % of the higher of :
• Remuneration – 180 000 = 27.5% X 180 000 = 49 500
• Taxable Income before s18A – Assumed in this case to be 180
000 + 50 000 = 230 000 * 27.5% = 63 250
• Taxable income before any capital gains – 230 000

• Therefore s11F Benefit fund deduction is R19 200

 DONATION TO PBO – S18A
• Deduction for bona fide donations of cash or property in kind
made by taxpayer to:
• Certain approved PBOs
• Limited to an amount that does not exceed 10% of the taxable
income before deductions under this section.
• Excess donations can be carried forward to a future YOA
 HOW TO CALCULATE TAX

​Taxable income (R) ​Rates of tax (R)

1 – 226 000 18% of taxable income
226 000 – 353 100 40 680 + 26% of taxable income above 226 000
353 101 – 488 700 73 726 + 31% of taxable income above 353 100
488 701 – 641 400 115 762 + 36% of taxable income above 488 700
641 401 – 817 600 170 734 + 39% of taxable income above 641 400
817 601 – 1 731 600 239 452 + 41% of taxable income above 817 600
1 731 601 and above 614 192 + 45% of taxable income above 1 731 600
 REBATES
• Important
- The rebates are subtracted from normal tax
- and NOT from Taxable Income.

• Updated annually

• Reduction in tax payable

• Types of rebates available

1. Normal Tax Rebates - s6
2. Medical Scheme Tax Credits - s6A and s6B
3. Foreign Tax Rebates
 NORMAL TAX REBATES - S6
• All individual taxpayers receive a primary rebate
- 2023: 16 425

• Individuals 65 years or older on last day of year of assessment

also receive a secondary rebate
- 2023: R9 000

• Individuals 75 years or older on last day of year of assessment

also receive a tertiary rebate
- 2023: R2 997
 TAXABLE INCOME FRAMEWORK
NORMAL TAX

Taxable Income XXX

Tax per the tax tables (based on Taxable Income and Tax XXX
Tables)

Rebates (s6 – primary, secondary and tertiary) (XXX)

Rebates (s6A) (XXX)

Rebates (s6B) (XXX)

Normal Tax XXX

 MEDICAL SCHEME FEES CREDIT
• Taxpayers under 65 also receive a tax credit for monthly
medical contributions

• A taxpayer will receive a monthly tax credit of

- R347 for one member of the medical scheme.
- R694 for the taxpayer and one dependent.
- R234 for each additional dependent.
ADDITIONAL MEDICAL EXPENSES TAX
CREDIT

Medical Aid
Contributions
Two types of
Medical Expenses
Medical Expenses
 ADDITIONAL MEDICAL EXPENSES TAX
CREDIT
• Medical contributions – as discussed in S6A

• Medical expenses include:

• Amounts paid to:
• Registered Medical Practitioner
• Registered Nursing Home
• Registered Pharmacist
• Amounts paid to:
• Foreign expenditure of same nature as above
• Expenditure prescribed for physical impairment or disability
ADDITIONAL MEDICAL EXPENSES TAX
CREDIT

Over 65 years

3 Separate Handicapped
Scenarios (with disability)

Under 65
years
 ADDITIONAL MEDICAL EXPENSES TAX
CREDIT
• Taxpayers over the age of 65 years

Medical Aid Contributions XXX

Less 3 x s6A medical aid credit (XXX)
Qualifying Contributions (limited to R nil) XXX

Add Qualifying Medical Expenses XXX

Subtotal XXX
Defined credit rate x 33.3%
Additional Medical Expenses Tax Credit XXX

• Taxpayer is also entitled to a s6A rebate

 ADDITIONAL MEDICAL EXPENSES TAX
CREDIT
• Disabled persons
• (same as >65 calculation)

• If the taxpayer has a disabled spouse or child on the medical aid,

they can claim as if they were disabled/handicapped.
 ADDITIONAL MEDICAL EXPENSES TAX
CREDIT
• Taxpayers under the age of 65 years
Medical Aid Contributions XXX
Less 4 x s6A medical aid credit (XXX)
Qualifying Contributions (limited to R nil) XXX
Add Qualifying Medical Expenses XXX
Subtotal XXX
Less 7.5% of Taxable Income (XXX)
Subtotal XXX
Defined credit rate X 25%
Additional Medical Expenses Tax Credit XXX

▪ Taxpayer is also entitled to a s6A rebate

 LECTURE EXAMPLE 4
PART A

On 1 March 2022, Anne Hasherway (age 66) was employed by Catwoman

(Pty) Ltd. Her cost of employment is R550 000 per year. She contributes to
both a pension fund and retirement annuity fund. Her medical aid
contributions are R1 200 per month. Her taxable income amounts to
R230 000. Anne is unmarried with no dependants. Anne has paid R34 000
in qualifying medical expenses and is not a disabled person as defined.

Calculate her normal tax liability for the 2023 year of assessment.
 LECTURE EXAMPLE 4
Solution – Part A 2023
Taxable Income R230 000

Tax per tables: 38 916 + 26% x (230 000 – 216 201) = R42 503
Less Rebates:

s6: Primary Rebate (R15 714)

Secondary Rebate (R8 613)

s6A: 332*12 (R3 984)

s6B: s6B medical expenses tax credit (>65):

Actual contribution R1 200 x 12 = R14 400

Reduced by 3 x (R332 x 12) = (R11 952)
Qualifying Contributions R 2 448
Qualifying Medical Expenses R34 000
Excess R36 448
x33.3%
(R12 137)

Normal Tax R2 055

 LECTURE EXAMPLE 4
PART B

On 1 March 2022, Anne Hasherway (age 28) was employed by Catwoman

(Pty) Ltd. Her cost of employment is R550 000 per year. She contributes to
both a pension fund and retirement annuity fund. Her medical aid
contributions are R1 200 per month. Her taxable income amounts to
R550 000. Anne is unmarried with no dependants. Anne has paid R44 000
in qualifying medical expenses and is not a disabled person as defined.

Calculate her normal tax liability for the 2023 year of assessment.
 LECTURE EXAMPLE 4
Solution – Part A 2022:
Taxable Income R550 000

Tax per tables: 110 739 + 36% x (550 000 – 467 501) = R140 439
Less Rebates:

s6: Primary Rebate (R15 714)

s6A: 332*12 (R 3 984)

s6B: s6B medical expenses tax credit (>65):

Actual contribution R1 200 x 12 = R14 400

Reduced by 4 x (R332 x 12) = (R15 936)
Qualifying Contributions R0
Qualifying Medical Expenses R44 000
Excess R44 000
Reduced by 7.5% of taxable income (R41 250)
R 2 750
x25%
(R 688 )

Normal Tax R120 053

 LECTURE EXAMPLE 5
On 1 March 2022, Anne Hasherway (age 30) was employed by Catwoman
(Pty) Ltd. Her cost of employment is R550 000 per year. She contributes to
both a pension fund and retirement annuity fund. Her medical aid
contributions are R1 200 per month. Her taxable income amounts to
R550 000. Anne is unmarried with no dependants. Anne has paid R44 000
in qualifying medical expenses and is not a disabled person as defined.
Anne and her sister Sue jointly pay the medical fees expenses of their
mom, who is dependent on them as defined. The monthly fee of R 1000
is split 50/50 between the two sisters. Their mom have been a member of
the registered medical aid for the full year

Calculate her normal tax liability for the 2023 year of assessment.
 LECTURE EXAMPLE 5
Solution – Part A 2022:
Taxable Income R550 000

Tax per tables: 110 739 + 36% x (550 000 – 467 500) = R140 439
Less Rebates:

s6: Primary Rebate (R15 714)

s6A: 332*12 + (166 x 12) (R 5 976)

s6B: s6B medical expenses tax credit (>65):

Actual contribution (R1 200 x 12 ) + (R500X 12)= R20 400

Reduced by 4 x ( R 5 976) (R23 902)
Qualifying Contributions R0
Qualifying Medical Expenses ` R44 000
Excess R44 000
Reduced by 7.5% of taxable income (R41 250)
R 2 750
x25%
(R 688 )

Normal Tax R120 053

 SECTION 7
ANTI –AVOIDANCE SECTIONS
• Taxation of married couples – s 7(2) or s 7(2A)
• Spouses are taxed separately
• Spouse is defined in s 1

• Section 7 (2) – Deemed Inclusions

• Applies whether married in or out of COP
• Where recipient spouse receives income from donor spouse
with the 100% or main intention ( >50%) of avoiding,
reducing or postponing tax, the donor spouse will be taxed
on that income.
• Refer to examples: 7.18 & 7.19
 MARRIAGE IN COP
• S7(2)(b) - Exceeding reasonable Income:
• Recipient spouse receives excessive income from
• trade donor spouse is connected to,
• recipient and donor spouse partners in a trade
• Where donor spouse is or was a partner, private company where donor
spouse only member or main member.
• Any excessive income earned by the recipient spouse will be taxed in
the hand of the donor spouse.
• The donor spouse business will still get the deduction
• But the income will be included in the income of the donor spouse and
only reasonable amount will be taxed in the hands of the recipient
spouse.
 MARRIAGE IN COP
• Results in joint estate.
• Assets can fall outside the joint estate if correctly stipulated in will or
action resulting in asset.
• S7 (2A) and s 7(2C)
• Sets rules regarding in whose hands income will be taxed.
• Trade Income – whoever carrying on trade ( excl rental prop)

• Rental Prop & non trade income

• Non trade - eg dividend, interest, annuities excl purchased annuities
and fund annuities
MARRIAGE IN COP
 MINOR CHILDREN – s 7(3)
• Income received by reason of donation, settlement or disposition by a
parent.
• Major at age of 18
• Age at date of receipt/ accrual not donation that matters.
• Taxed in hands of donor parent.
• Refer to the examples pg 190 -191