COLLEGE OF ACCOUNTING SCIENCES

DEPARTMENT OF TAXATION

TEST 4: 12 SEPTEMBER 2022

TAX3761 - TAXATION OF BUSINESS ACTIVITIES AND INDIVIDUALS

(40 marks)

2 hours (including 15 minutes download and 30 minutes upload time)

THIS PAPER CONSISTS OF SIX (6) PAGES plus Annexures pp i - iv

IMPORTANT INSTRUCTIONS:

Assumptions:
1. All amounts exclude Value-Added Tax (VAT) unless specifically stated otherwise.
2. The VAT rate increased from 14% to 15% from 1 April 2018.
3. All persons mentioned are residents of the Republic of South Africa unless stated otherwise.
4. SARS = South African Revenue Service.
5. All transactions are conducted with registered VAT vendors, unless specifically stated otherwise.
6. Valid tax invoices and required documentation are obtained for all transactions.

The answering of this paper:

1. This is a closed-book test.
2. This paper consists of one (1) question with two (5) subsections, i.e., a and b.
3. All questions and sub-sections must be answered.
4. Each sub-section must be commenced on a new (separate) page.
5. All workings, where applicable, must be shown. Where an amount is subject to a limitation, clearly
indicate the application of the limitation. Where any item does not form part of gross income, is
exempt from tax or not allowable as a deduction, this must specifically be indicated, and a short reason
should be provided.
6. All amounts must be rounded to the nearest Rand.

Honesty Declaration:

By submitting my solution to the test, I declare that:

I know what plagiarism is, that plagiarism is wrong and that disciplinary steps can be taken against
me if I am found guilty of plagiarism;
This solution, submitted by myself, is my own work;
I have not assisted any other student in any manner and I have not had the assistance of any other
person, in completing this test;
I will not assist any other student in any manner and I will not obtain the assistance of any other
person, in completing this test;
I know that if I am found to be in violation of this declaration, I will receive 0% for this test.
Please note: You do not have to sign the declaration. By submitting your solution, you
automatically declare that you adhere to all the above with regards to this specific assessment.
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Test 4 September 2022

The Invigilator

• Please note The Invigilator App is not used during Test 4 for TAX3761.

Submission instructions:

Please remember to complete the Honesty Declaration (Part of file submission process
below).

Follow these steps to submit your answer file:

1. Go to https://my.unisa.ac.za/portal and login with your myUnisa credentials i.e. student number
and password.
• Click on myAdmin – Assessments and Assignments View.
• Alternatively you can access the assignment submission tab from this link directly - https://stra
tus.unisa.ac.za/sacdl20/asps/unisa_assignments.asp
• Students who cannot access myUnisa for the test question paper or to upload their answer scripts
should use the following link - https://mooc.unisa.ac.za/portal - CAS Test 4 2022.
Please note that this option must only be used if you struggle to upload your script from myUnisa,
as you need to register on the MOOC portal first before you can continue.
• ATTACH/UPLOAD ANSWER FILE
o A new page will open. Scroll down to the blue Submit button.
o Make sure all your ALL your pages are converted into a single PDF document for up-
loading (make sure the file is not read-only or password protected).
o Click the Choose File button to browse for a file.
o Once you have attached your answer file, the name of the file, as well as the file size and
upload time stamp will be displayed.
o TIP: You may click Remove to remove the attachment if you selected the wrong file on
your device.
• Remember to complete the Honesty Declaration by typing in two separate words “I AGREE”
at the end of the submission process.
• SUBMIT ANSWER FILE
o When you are ready and satisfied that you have the correct answer file, click the Continue
button to complete your assessment submission.
o Be sure to submit on time, before test session ends. Click Cancel to exit the assessment
without saving or submitting.
• Once you have submitted your assessment, you will receive a confirmation message on the
screen.
• Make a screen copy for your records.
• In addition, if you have opted to receive an email notification, you will also receive an email confir-
mation of your submission.

Additional instructions:

• The final submission of your answer script will be on myUnisa or the MOOC platform, and these
two platforms are the only valid submissions that will be accepted by the university.
• No emailed scripts will be accepted.
• Students are advised to preview submissions (answer scripts) to ensure legibility and that the
correct answer script file has been uploaded.
• Student are permitted to resubmit their answer scripts should their initial submission be unsatis-
factory.
• Incorrect file format and uncollated answer scripts will not be considered.
• Incorrect answer scripts and/or submissions made on unofficial examinations platforms will not
be marked and no opportunity will be granted for resubmission.
• Mark awarded for incomplete submission will be the student’s final mark. No opportunity for
resubmission will be granted.
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Test 4 September 2022

• Mark awarded for illegible scanned submission will be the student’s final mark. No opportunity
for resubmission will be granted.
• Submissions will only be accepted from registered student accounts.
• Students suspected of dishonest conduct during the examinations will be subjected to disciplinary
processes. UNISA has a zero tolerance for plagiarism and/or any other forms of academic disho-
nesty.
• Students are provided 30 minutes to submit their answer scripts after the official test time. Sub-
missions made after the official test time will be rejected by the examination regulations and will
not be marked.

The test paper will remain available throughout the session.

Commence the submission (uploading) of your answer file as soon as you have completed the assess-
ment, do not wait for the session to conclude.

Important: Start uploading your answer file at 14:30 pm (90 minutes after the start of the test
session) at the latest, to allow enough time for any delays in the process.

You must submit your answers in one pdf file. The file name of your pdf document must be in the
following format: Student number, space, TAX3761. For example: 33445566 TAX3761.

Your submission will be date stamped and only submissions received up to 15:00 pm will be marked.
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Test 4 September 2022

QUESTION 1 (40 marks, 90 minutes)

Thlanthla Lekgheto (49 years old and married to Barati Lekgheto out of community of property) was an
employee of a local company ‘Just Cater’, manufacturing catering appliances. He worked for his employer
for 30 years.

Sadly, Thlanthla was killed at work when faulty manufacturing equipment shocked him. Below are details
of Thlanthla’s total income, benefits, expenses, and contributions for the nine-month period up to the date
of his death on 30 September 2021:
Note R
Income/benefits
Salary (R75 000 x 9 months) 675 000
Accumulated leave-pay 1 95 000
Reimbursement of travelling expenses 2 ?
Compensation paid to Thlanthla's wife 3 250 000
Provident fund lump sum benefit 4 1 600 000
Trustee's remuneration (R6 000 per month) and other related trust infor-
mation 5 54 000

Expenses/contributions

Current provident fund contributions 4 108 000

Medical expenses 6 72 000

Notes:

1. Accumulated leave-pay

Thlanthla’s employer paid out R95 000 on 30 September 2021 in respect of accumulated leave that
he did not use up to the date of his death.

2. Reimbursement of travelling expenses

Thlanthla used his own vehicle for travelling to purchase replacement parts for manufacturing equip-
ment. He travelled an average of 450 kilometres per month to and from the suppliers and his work
for this purpose. His employer reimbursed him at R4.98 per kilometre.

3. Compensation paid to Barati

On 30 September 2021, Just Cater paid compensation of R250 000 to Barati as a result of his death
at work. Thlanthla did not hold any equity shares in Just Cater.

4. Provident fund lump sum benefit

A gross amount of R1 600 000 accrued to Barati in respect of a lump sum retirement benefit from the
employer’s provident fund that Thlanthla belonged to. Thlanthla never received any other lump sum
benefits during his lifetime.

Thlanthla and Just Cater each contributed 50% to the provident fund up to the date of his death. The
total contributions during Thlanthla’s 2022 year of assessment amounted to R108 000. Contributions
to the provident fund during prior years that were disallowed as deductions for normal tax purposes
amounted to R40 000 up to 28 February 2021.
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Test 4 September 2022

QUESTION 1 (continued)

5. Trustee's remuneration and other related trust information

Thlanthla (up to the date of his death), his wife Barati and their accountant, are trustees of the
Lekgheto Family Trust (“the trust”). The trust was founded during March 2017 by Thlanthla's father,
Jabu Lekgheto.

Each trustee receives trustee remuneration of R6 000 per month.

The beneficiaries of the trust are:

• Thlanthla and Barati's son, Andile, 28 years old, a resident of, and working in Australia.
• Thlanthla and Barati's daughter, Justine, 16 years old at the date of Thlanthla’s death and still
in high school.

The trust owns the following assets:

• A block of flats to the value of R12 million. Thlanthla inherited the block of flats from his
grandfather and donated it to the trust on 31 March 2017.
• A fixed deposit of R6 million held in a local bank. Thlanthla’s father, Jabu (76 years of age)
donated this deposit to the trust on 31 March 2017.

The following total trust distributions were made from 1 March 2021 up to 30 September 2021:

• Each beneficiary received a total vested rental income distribution of R35 000, and
• Each beneficiary received a total vested interest income distribution of R10 000.

The following total trust distributions were made from 1 October 2021 to 28 February 2022:

• Each beneficiary received a total vested rental income distribution of R15 000, and
• Each beneficiary received a total vested interest income distribution of R3 000.

Assume the following amounts were retained in the Lekgheto trust on 28 February 2022:

• R145 000 rental income, and R38 000 interest income.

At the date of his death, the Lekgheto Family Trust owed Thlanthla R2 500 000 in respect of an
interest-free loan he made to the trust on 1 March 2017. Thlanthla's will stipulates that the loan of
R2 500 000 owed to him by the Lekgheto Family Trust, must be donated to the trust upon his death.
Assume Thlanthla has never made any other donations since 1 March 2018 and the official rate of
interest (as defined) was 8% per annum for the entire year of assessment.

6. Medical expenses

Thlanthla contributed R72 000 to a medical scheme up to 30 September 2021. Thlanthla’s employer
was aware that he is a member of a medical scheme and agreed to take it into account. Thlanthla,
Barati and Justine are members of the medical scheme and none of them have a disability, as defined
in terms of section 6B(1) of the Income Tax Act (Act 58 of 1962), as amended.

7. Provisional tax

Thlanthla is registered as a provisional taxpayer.

The following information is available:

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Test 4 September 2022

QUESTION 1 (continued)

The date of his income tax notice of assessment (ITA34) for his 2019 year of assessment was
1 February 2020. The assessment indicates a taxable income of R610 000, including an amount of
R10 000 that relates to a taxable capital gain.

The date of his income tax notice of assessment (ITA34) for his 2020 year of assessment was
13 February 2022. The assessment indicates a taxable income of R660 000 and Thlanthla incurred
an assessed capital loss of R5 000.

His 2021 year of assessment has not been assessed yet.

REQUIRED: MARKS

a) Calculate the employees’ tax that Thlanthla’s employer (Just Cater) had to withhold
from his remuneration for the month of September 2021. 20

b) Calculate the tax on Thlanthla’s lump sum benefit(s) for the 2022 year of assess- 2
ment.

c) This section is in respect of the amounts distributed or retained by the Lekgheto

Family Trust (under note 5) for the 2022 year of assessment.

Calculate (as indicated below), providing reasons for inclusions or exclusions of

amounts, for the following persons:

i) Taxable income of Justine 4

ii) Gross income of Jabu 2
iii) The tax payable by the Lekgheto Family Trust 3

d) Calculate any possible donations tax payable by Thlantla. Provide a reason,

should an item not be subject to donations tax. 5

e) Briefly discuss and calculate Thlanthla’s basic amount for purposes of determining
his second provisional tax payment in respect of his 2022 year of assessment.
Provide reasons for using (or not using) specific years of assessment amounts. 4

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©
Unisa
2022
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Test 4 September 2022

SCHEDULES

A. 2022 – TAX TABLES

(i) Persons (other than companies and trusts)

Taxable income Rates of tax

Where the taxable income does not exceed 18% of each R1 of the taxable income;
R216 200

exceeds R216 200 but does not exceed R337 800 .... R38 916 plus 26% of the amount by which the
taxable income exceeds R216 200;

exceeds R337 800 but does not exceed R467 500 ..... R70 532 plus 31% of the amount by which the
taxable income exceeds R337 800;

exceeds R467 500 but does not exceed R613 600 ..... R110 739 plus 36% of the amount by which
the taxable income exceeds R467 500;

exceeds R613 600 but does not exceed R782 200 .... R163 335 plus 39% of the amount by which the
taxable income exceeds R613 600;

exceeds R782 200 but does not exceed R1 656 600 . R229 089 plus 41% of the amount by which the
taxable income exceeds R782 200;

exceeds R1 656 600.................................................... R587 593 plus 45% of the amount by which the
taxable income exceeds R1 656 600.

(ii) Trusts – 45%

(iii) Tax on retirement lump sum benefits (or death)

Taxable income from benefit Rate of Tax

R0 – R500 000...................................................... 0 per cent of taxable income
Exceeding R500 000 but not exceeding R0 plus 18% of taxable income exceeding
R700 000 ............................................................... R500 000
Exceeding R700 000 but not exceeding R36 000 plus 27% of taxable income exceeding
R1 050 000 ............................................................ R700 000
Exceeding R1 050 000 .......................................... R130 500 plus 36% of taxable income exceeding
R1 050 000
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Test 4 September 2022

(iv) Tax on retirement lump sum withdrawal benefits (pre-retirement)

Taxable income from benefit Rate of Tax

R0 – R25 000 ............................................................ 0 per cent of the taxable income
Exceeding R25 000 but not exceeding R660 000.... 18% of taxable income exceeding R25 000
Exceeding R660 000 but not exceeding R990 000.. R114 300 plus 27% of taxable income excee-
ding R660 000
Exceeding R990 000 ................................................. R203 400 plus 36% of taxable income excee-
ding R990 000

B. FRINGE BENEFIT TABLES

(i) Employee-owned vehicles (section 8(1))

SCALE OF VALUES

Where the value of the vehicle Fixed cost Fuel cost Maintenance
R c cost
C

does not exceed R95 000 ............................................... 31 332 105,8 37,4

exceeds R 95 000 but does not exceed R190 000 ......... 55 894 118,1 46,8
exceeds R190 000 but does not exceed R285 000 ........ 80 539 128,3 51,6
exceeds R285 000 but does not exceed R380 000 ........ 102 211 138,0 56,4
exceeds R380 000 but does not exceed R475 000 ........ 123 955 147,7 66,2
exceeds R475 000 but does not exceed R570 000 ........ 146 753 169,4 77,8
exceeds R570 000 but does not exceed R665 000 ........ 169 552 175,1 96,6
exceeds R665 000 169 552 175,1 96,6

(ii) Prescribed rate of reimbursive travel expenses – R3.98 per kilometre

(iii) Employer owned vehicles (Paragraph 7(4) of the Seventh Schedule) Scale of values

Value of private use per month, vehicle not subject to maintenance plan = 3.5% x determined value
Value of private use per month, vehicle subject to maintenance plan = 3.25% x determined value

(iv) Subsistence allowance as per Government Gazette No. 39724

Daily allowance for incidental cost is R139 per day.

Daily allowance for food and incidental cost is R452 per day.

C. REBATES

Persons under 65 ..................................................................................................................... R15 714

Persons 65 and under 75 (R15 714 + R8 613) ...................................................................... R24 327

Persons 75 and over (R15 714 + R8 613 + R2 871) .............................................................. R27 198
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Test 4 September 2022

D. MEDICAL AID TAX CREDITS

Main member R332

Main member with one dependent (R332 + R332) R664

Main member with two dependents (R332 + R332 + R224) R888

Each additional dependent qualifies for a further rebate or credit of R224.

E. INCOME TAX MONETARY THRESHOLDS SUBJECT TO PERIODIC LEGISLATIVE

CHANGE:

Description Reference to Income Tax Act, Monetary

1962 amount

Exemption for interest and certain dividends:

In respect of persons 65 years or older, exemption Section 10(1)(i)(i) R34 500

for interest from a source within the Republic which
are not otherwise exempt
In respect of persons younger than 65 years, exemp- Section 10(1)(i)(ii) R23 800
tion for interest from a source within the Republic
which are not otherwise exempt
Annual donations tax exemption:
Exemption for donations made by individuals Section 56(2)(b) R100 000

Retirement savings thresholds:

Deductible retirement fund contributions:
Members of retirement funds may deduct their
contributions subject to certain percentage or
monetary ceilings
Monetary ceiling for total contributions to retire- Proviso to section 11F R350 000
ment funds
Deductible business expenses for individuals:
Car allowance:
Individuals receive an annual vehicle allowance to
defray business travel expenses, including deem-
ed depreciation on the vehicle.
Ceiling on vehicle cost Section 8(1)(b)(iiiA)(bb)(A) R665 000
Ceiling on debt relating to vehicle cost Section 8(1)(b)(iiiA)(bb)(B) R665 000
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Test 4 September 2022

Administration
Exemptions from provisional tax:

Description Reference to Income Tax Monetary

Act, 1962 amount
In the case of a natural person not carrying on a Paragraph 18(1)(c)(i) of Taxable in-
business Fourth Schedule come below
threshold
In the case of a natural person not carrying on a Paragraph 18(1)(c)(i) of Taxable in-
business Fourth Schedule come from
interest, fo-
reign divi-
dends, rental
income and
remuneration
from a fo-
reign em-
ployer (not
registered for
PAYE) does
not exceed
R30 000

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