Tax Module 5 - Individuals

Individuals can either be... or ...?
Carrying on a business, employed
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What deductions are individuals allowed if carrying on a business?
All deduction (subject to s23 - prohibited deductions)
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What deductions are individuals allowed if they're employed?
Can only get deduction mentioned under s23m UNLESS they relate to a separate business you're carrying on
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When does s23m not apply to you even though you're employed?
If income is >50% commission - treated same as if carrying on business
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What deductions does s23m allow for salaried employees (relating to employment)?
Retirement funds s11f + legal exp s11c + wear and tear s11e + bad and doubtful debts s11i/j + repmt of employee benefits s11nA/B + any gen ded in respect of costs related to domestic premises which aren't disallowed under s23b
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Retirement funds (s11f) contribution is ltd to the lesser of...? (Excess carried forward and deducted in next year)
R350 000 OR 27.5% of higher of remuneration as defined/taxable inc before s11f or s18a deductions OR taxable inc before s11f and before inclusion of any taxable capital gains
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What is the retirement fund contribution treated as for an employee?
Included in GI as a fringe benefit (para i) and then deducted under s11f
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What is the retirement fund contribution treated as for the employer?
Employer gets full deduction under s11l
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What deduction is allowed for a donation made by a tax payer to an approved PBO?
s11a - deduction can't exceed 10% of taxable income before the deduction - excess is carried forward
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What is a rebate?
A reduction in tax payable (not taxable income)
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What type of rebates are available?
1. Normal tax rebates s6 2. Medical Scheme Fees Credit s6A 3. Additional Medical Expenses Tax Credit s6B
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When is a normal tax rebate apportioned?
Only for partial periods of assessment ie. birth, death, insolvency
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What is the primary rebate and requirements?
R14067 - available to everyone
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What is the secondary rebate and requirements?
R7713 - 65+
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What is the tertiary rebate and requirements?
R2574 - 75+
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What happens if someone dies halfway through year but would have been 65 at year end?
Get primary AND secondary - need to apportion for 1/2 year
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What monthly credit will a TP receive for contributing to a medical aid scheme with one member?
R310
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What monthly credit will a TP receive for contributing to a medical aid scheme with one member and one dependent?
R620
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What monthly credit will a TP receive for contributing to a medical aid scheme with for each additional dependent (>1)?
R209 for each additional dependent
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Will the taxpayer still receive the rebate if their employer makes the payments for them?
Yes - included in GI by virtue of being a FB so deemed to have been made by member themself
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What is a qualifying medical expense?
Amounts paid and not recovered during YOA in respect of services/medicine provided by doctor, hospitalisation (can be at home), home nursing, medicines prescribed, any exp prescribed by Commissioner as a result of physical imp or disability
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Do medical expenses incurred outside of SA get included in the rebate?
Yes - as long as similar to list above
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Can it be any doctor, nurse, hospital etc?
Need to be registered
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What is a dependent?
Spouse, child/child of spouse, any other family member TP is liable to support, any other person recognised as dependent under their medical scheme
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When is a child a dependent normally?
On last day of YOA was unmarried and 18 or younger
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When is a 21 year old a child?
Entirely/partly dependent on TP for maintenance and doesn't pay any normal tax
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When is a 26 year old a child?
Was a full time student and owes no normal tax
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When can someone of any age still be a child?
If can't support themselves due to a disability and owe no normal tax
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What is a fringe benefit?
A non-cash benefit received from an employer
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How do you value a FB?
Value of private use - any consideration paid by employee = cash equivalent included in GI as per para (i)
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What types of FB's are there?
1. Asset Aq. At Less Than Actual Val. 2. Right Of Use Asset 3. Meals, Refreshments + Vouchers 4. Contribution To Benefit Fund 5. Contribution To Pension, Providend Fund Or RAF
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What is the value of the asset if acquired at less than actual value?
Value = cost if bought for employee specifically and is moveable, if trading stock then value is lower of cost and MV, in any other case value = MV
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Whats is the value of the cash equivalent of an asset acquired at less than actual value if it was awarded for bravery/long sevice?
Cash equivalent is reduced by lesser of R5000 or aggregate cost of awards during year
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What is classified as long service?
Initial unbroken period of employment of 15 years or any subsequent period of 10 years
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What happens if the employer gave the employee immoveable property for less than its actual value?
Para 3A - no value placed on it
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When does para 3A not apply?
If employee's remuneration proxy > R250 000 OR the MV of the property > R450 000 OR the employee is a connected person to the employer
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What is the value of a right of use asset rented by the employer?
Value = rental paid by employer x days employee can use it
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What is the value of a right of use asset owned by the employer?
Value = 15% pa of lower of MV at date of use OR cost to employer
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What is the value of a right of use asset when employee is granted sole use for a major portion of the asset's useful life?
Value = cost
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When will no value be placed on the right of use asset?
1. Incidental private use by all employees in general 2. Any eq/machines which employee allowed to use for short periods of time provided they're less than the amount set out by SARS 3. Assets including books, literature, recordings or works of art
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What is a meal, refreshment or voucher FB?
Employer provides employee with meals, refreshments or vouchers for free or for lower than actual cost
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What is the cash equivalent of meals, refreshments and vouchers?
Cost to employer - cost paid by employee
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According to para 8(3) there's no value on...
Canteen, if provided during business or extended working hours, or if used for providing entertainment
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What is the value of meals, refreshments and vouchers?
Value = cost to employer
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What is the value of a contribution to a benefit fund by employer?
Value = amount paid (average if not specific)
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According to para 12A(5) when is there no value?
If person retires due to superannuation, ill health or other infirmity and still contributing OR contributing to dependants after employee's death
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What is the value of an employer's contribution to a pension, providend fund or RAF?
Value = amount paid by employer
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According to para 12D(6) when is there no value?
If for benefit of person who's retired OR for benefit of dependants after employee's death
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Where do allowances, advances and reimbursements go on tax calculation?
Below trading stock allowances and above subtotal 1
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What is an allowance?
Money given to employee where firm is certain emp will incurr costs on their behalf - don't have to prove/account for it
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What is a travel allowance s8(1)?
Used to pay motor vehicle expenses of vehicle used for business purposes - inclusion reduced by business travel expense so you only include the private portion
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What is the actual costs and actual business km's method?
Calculate actual costs of running vehicle eg. fuel, maintenance, license, insurance, wear and tear (cost of car/7) and then times ratio of business to total km's by costs (need proof of costs)
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What is the deemed costs and actual business km's method?
Used if you haven't kept a log of expenditure - based on table so you just need value of vehicle
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What is the value of the vehicle for deemed cost method?
If acquired in arms length transaction its the original cost to the TP including VAT but excluding finance charges, if acquired under lease its the cash value, if any other case its the MV on date obtained
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What is the simplified rate and actual business km's method?
Employee has option to deduct R3.61 p/km from the allowance - can only be used if emp receives no other reimbursement or allowance
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What are other allowances s1(a)(ii)?
General principle for other allowances eg entertainment is to include them in TI
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When are other allowances not included in TI?
If amount is incurred on instruction of employer to further the employer's trade and the employee has produced proof and accounted for exp to employer and if asset purchased ownership must be given to employer
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What is an advance?
Money granted to employee where its certain employee will incur the expense - employee required to prove/account for expense and employer receives the difference where actual costs are less
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What are reimbursements?
An employee has incurred business related expenses out of her own pocket so business pays her back
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What is employees tax?
A withholding's tax - every month employer withholds an amount from your salary and pays it to SARS for you
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Other cards in this set

Card 2

Front

What deductions are individuals allowed if carrying on a business?

Back

All deduction (subject to s23 - prohibited deductions)

Card 3

Front

What deductions are individuals allowed if they're employed?

Back

Preview of the front of card 3

Card 4

Front

When does s23m not apply to you even though you're employed?

Back

Preview of the front of card 4

Card 5

Front

What deductions does s23m allow for salaried employees (relating to employment)?

Back

Preview of the front of card 5
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