COLLEGE OF ACCOUNTING SCIENCES

DEPARTMENT OF TAXATION

TEST 3: 28 July 2023

TAX3761 - TAXATION OF BUSINESS ACTIVITIES AND INDIVIDUALS

(60 marks)

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

THIS PAPER CONSISTS OF SEVEN (7) 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 two (2) questions.
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.
 2 TAX3761
Test 3 July 2023

The Invigilator

Day of the assessment instructions:

Ensure you are connected to the internet to log into the Invigilator App and scan this QR code.
If you encounter difficulty in scanning the QR code, you can alternatively enter the Exam Access
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You can only scan this QR code once. You should NOT finish the invigilation until your entire
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Only scan the QR code when the assessment formally commences.
The QR code is only scannable for a limited time, and it should therefore be scanned as
soon as possible to start the invigilation.
Once the QR code is scanned, ensure your media volume is turned up and place your
smartphone next to you. The Invigilator App will notify you with a notification beep when you are
required to action a request, which you should then perform.
We recommend that you keep your smartphone on charge for the duration of the assessment.
If you only have one device, you may access your assessment in the application by pressing the

Keep the Invigilator App open on your cell phone for the full duration of the assessment.
You are not allowed to minimise or leave the app.
Ensure you are connected to the internet in order to commence the invigilation as well as at the
end of the assessment. No internet connection is required during the assessment.
You must adhere to the assessment time limit as the time displayed in the Invigilator App could
differ from the time allocated to complete your assessment.
You can click the "Finish Assessment" button in the app if you finish your assessment early.
If you are performing a written or Scan-and-Upload assessment:
The Invigilator App may request you to take a picture of every page of your answer sheet at the
end of the assessment. This does NOT replace the normal upload of your script to the
cas.myexams.unisa.ac.za platform on myUnisa.
After completing invigilation and following all app instructions, you must upload your Invigilation
App data. If, however, there is a delay in the upload of the app data at the end of the assessment,
you should prioritise the upload of your script to the cas.myexams.unisa.ac.za platform on
myUnisa and you can temporarily minimise the app to do so. You can come back and upload
your script on the app after you have successfully uploaded your script on the
cas.myexams.unisa.ac.za platform on myUnisa.
Should you encounter any technical difficulty, please WhatsApp The Invigilator Helpdesk on:

073 505 8273.

 3 TAX3761
Test 3 July 2023

Access and Submission instructions:

The test paper will remain available throughout the session.

Commence the submission (uploading) of your script as soon as you have completed the
assessment, do not wait for the session to conclude.

Suggestion: Start uploading your answer file at 15:30 am (120 minutes after the start of the test
session) at the latest, to allow enough time for any delays in the process.

Your submission will be date stamped and only submissions received up to 16:00 will be marked.

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.

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

Follow these steps to access your test question paper:

Go to cas.myexams.unisa.ac.za. (Do not go to myexams.unisa.ac.za, you will not find the

test paper there).
On the cas.myexams.unisa.ac.za portal, choose TAX3761-23-Y to open the assessment portal.
Under the applicable module you will find a TAB to access your paper Assessment 3 (Test 3)
(visible when the time for the test starts):

Follow these steps to submit your answer script:

Open the folder TAX3761-23-Y on the cas.myexams.unisa.ac.za platform.

You will do your submission in the same Assessment 3 (Test 3) folder from which you
downloaded your Test you will find a grey button to Submit at the bottom of the page.
Click on the Add Submission button.
Students who cannot access the cas.myexams.unisa.ac.za platform for the test question
paper or to upload their answer scripts should use the following link -
https://tinyurl.com/TEST2023b.
Please note that this option must only be used if you struggle to upload your script on
cas.myexams.unisa.ac.za
You must provide proof in the form of a screenshot and a timestamp if you encountered
any problems. Your screenshot must clearly show that you tried to submit via the
cas.myexams.unisa.ac.za platform or the alternative link BEFORE 16:00.
The cas.myexams.unisa.ac.za portal AND the link closes promptly at 16:00.
Note the file requirements such as:
o File size limit.
o Make sure all your ALL your pages are converted into a single PDF document for
uploading (Make sure the file is not read-only or password protected).
Check the acknowledgment checkbox and upload your
answer script and then click on the Save changes button.
Review your submission information regarding the status and click on your submission file link to
check if it is correct.
If you need to resubmit a file, you can click on the Edit Submission button. Note: You will need
to delete any existing files.
 4 TAX3761
Test 3 July 2023

Make a screen copy for your records.

Additional instructions:

1. Students must upload their answer scripts in a single PDF file on the cas.myexams.unisa.ac.za
platform (answer scripts must not be password protected or uploaded -
2. NO e-mailed scripts will be accepted.
3. Students are advised to preview submissions (answer scripts) to ensure legibility and that the
correct answer script file has been uploaded.
4. Students are permitted to resubmit their answer scripts should their initial submission be unsa-
tisfactory.
5. Incorrect file format and uncollated answer scripts will not be considered.
6. A No opportunity for
resubmission will be granted.
7. A mark awarded for illegible scanned submission will be the final mark. No opportunity
for resubmission will be granted.
8. Only the last file uploaded and submitted will be marked.
9. Submissions will only be accepted from registered student accounts.
10. Students must complete the online declaration of their work when submitting. Students suspected
of dishonest conduct during the tests will be subjected to disciplinary processes. Students may
not communicate with other students or request assistance from other students during tests. Pla-
giarism is a violation of academic integrity, and students who do plagiarise or copy verbatim from
published work will be in violation of the Policy on Academic Integrity and the Student Disciplinary
Code and may be referred to a disciplinary hearing. Unisa has zero tolerance for plagiarism and/or
any other forms of academic dishonesty.
11. Students are provided 30 minutes to submit their answer scripts after the official test time. In other
words, from 15:30 to 16:00. Submissions made after the official cut-off time (16:00) will be
rejected and will not be marked.
12. Queries that are beyond control include the following:
a. Personal network or service provider issues.
b. Load shedding/limited space on personal computer.
c. Crashed computer.
d. Using work on computers that block access to the cas.myexams.unisa.ac.za site (work
firewall challenges).
e. Unlicensed software (e.g., license expires during exams).
13. Only communication received from your myLife account will be considered.
 5 TAX3761
Test 3 July 2023

QUESTION 1 (40 marks, 72 minutes)

Kevin Zondo (Kevin) (38 years old) is the mine manager for a South African coal mining company
(CoalCo). Kevin does not own shares. Kevin is married in community of property
to Faith Zondo (Faith). They have a 20-year-old daughter and a 17-year-old son. Their daughter is
employed however she is partially dependent on her parents, she lives with them and her income is below
the tax threshold. Their son is still attending secondary (high) school. Faith owns a hair salon business
in her own name.

Kevin is responsible for managing the coal mine in Emalahleni, Mpumalanga, which is 700 kilometres
away from his primary residence (home). Kevin receives six (6) days leave each month of the year, which
can overlap between months, in addition to 31 days annual leave per year, which he always makes use of
to go home or to go away on holiday.

Details of Kevin and Faith income/receipts/benefits and expenses/contributions for the 2023 year of
assessment are as follows:
Notes R

Income/receipts/benefits
Salary 1 200 000
Bonus 200 000
Travel facility 1 ?
Accommodation and furniture 2 ?
Hair salon business taxable income 3 900 000
Sale of a flat 4 1 800 000
Local interest 5 ?

Expenses/contributions
Medical expenditure 6 ?
Current contributions to a provident fund 7 ?
Current contributions to a retirement annuity fund 7 ?

Notes:
1. Travel facility

CoalCo provided a travel facility two times during the current year of assessment for Faith, their
daughter and son, to visit Kevin at his apartment close to the mine. A bus ticket to Kevin
(close to the mine) and back home costs R750 per person. Faith, their daughter, and son made use
of the travel facility during the year. 600 per
person.

2. Accommodation and furniture

CoalCo provided Kevin with a four-roomed, fully furnished apartment that they owned, for two months
during the year of assessment. It was provided to Kevin temporarily, after the flat he rented was
destroyed by a fire and needed to be repaired. CoalCo also paid for the electricity that Kevin used.
You may assume Kevin of assessment was R1 100 000.

Kevin purchased a desk and chair set costing R8 000 on 1 June 2022 to perform strategic mine
operational planning from during the year of assessment.

The write-off period based on Interpretation Note no. 47 is six (6) years for furniture and fittings.

3. Hair salon business taxable income

Faith owns a hair salon in her own name which earned a taxable income of R900 000 for the year of
assessment.
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Test 3 July 2023

QUESTION 1 (continued)

4. Sale of a flat

Faith sold a flat on 1 March 2022 for R1 800 000. Faith inherited the flat from her late grandmother
seven years ago, which she rented out and earned a taxable rental income of R7 000 per month.
She received the rent for February 2022 on 7 March 2022. The value of the flat in her late
395 000 when Faith inherited it. The flat originally cost her
grandmother R800 000 when she purchased it twenty years prior to her death. Faith had an awning
years ago at a cost of R85 000. She also had the flat
disinfected at a cost of R10 000 before she sold it. The flat is not excluded from
communal estate.

5. Local interest

Kevin and Faith earned local interest of R15 000 and R73 600 respectively during the year of
assessment, which is not from a tax-free investment.

6. Medical expenditure

Kevin is a member of a medical aid fund and Faith, and the two children are registered as
dependants. No member of the family has a disability as defined.
percent of the total medical aid contributions amounted to R36 000 for the year of assessment.
CoalCo paid the balance of eighty (80) percent on his behalf.
Kevin undergoes a health check-up every year at work
ensure that they are healthy. -up cost CoalCo R4 000 for the year.

7. Retirement fund contributions

CoalCo and Kevin each made provident fund contributions of R56 000 during the year of assessment
(R112 000 was contributed in total). Kevin also made a once off contribution of R180 000 towards a
retirement annuity fund, of which CoalCo is not aware. You may assume that his gross remuneration
for the year amounted to R1 600 000, only for purposes of the retirement fund contribution deduction
calculation. Kevin had a balance of disallowed retirement fund contributions of R50 000 on
28 February 2022.

REQUIRED: MARKS

Calculate Kevin Zondo income tax payable after rebates and tax credits for the
year of assessment ended 28 February 2023. Provide reasons and substantiate in terms
of the Income Tax Act, where an amount is not excluded from taxable income, or not
subject to tax, or not allowable as a deduction, with reference to all the information
40
provided.
 7 TAX3761
Test 3 July 2023

QUESTION 2 (20 marks, 36 minutes)

On 2 January 2023, Buhle Moyo will start new employment as a marketing assistant manager with Medical
, a large provider of various medical services and supplies. MSS is trading
as a medical scheme but is exempt from the requirements of the Medical Schemes Act. Buhle is 40 years
old and a widow and does not receive any additional support from someone else. She has two children,
Brigid (19 years old and passed grade 12) who wants to enrol for a degree at a university in the beginning
of 2023, and Princess (16 years old) who will start with grade 10 in 2023. Buhle contributes toward the
study fees. None of the family members are beneficiaries of a registered medical aid scheme.
None of the family members has a disability, as defined.

Buhle a total gross remuneration package (before any deductions) of R600 000 per annum. The cash
remuneration package will exclude any equipment that she will need to perform her duties mainly for work
purposes, such as a computer and a mobile phone, which will be provided by her employer.

Buhle is a member of a professional marketing body, a condition of her employment, as stipulated by MSS.
She will be required to travel to current and prospective customers and branches of MSS. Flights,
accommodation costs and meals and incidental costs will be covered by MSS as business expenses.
When she does not travel by air, she is required to make use of her own motor vehicle for business trips.

REQUIRED: MARKS

MSS has provided Buhle with the opportunity to structure her employment agreement in

amended, including the consideration of any available fringe benefit and allowance.

Buhle approached you as a tax practitioner to advise her on how she could structure her
employment agreement in a way to effectively reduce her out of pocket expenses and pay
as little tax as possible.

Write Buhle an email, providing her with a possible structure that her employment
agreement could consist of, considering only the relevant information provided in the
question. For each item you include in your recommendations to Buhle, provide an
explanation of the suggestion, any requirements that must be met in terms of the Income
Tax Act, and the tax and cash consequences of the suggestion. Number and list the
included items, its requirements and tax and cash consequences separate from, and below
each other.
18
Example on how to structure the items in your reply to Buhle:

1. Flight tickets, accommodation, meals and incidental costs paid by employer.

Incurred for purposes of the employer business.
Does not form part of taxable income, no private benefit.
No cash effect/expense.
2
Communication and layout.

Do not show any calculations but provide legislated amounts (as stipulated in the
ITA), where applicable, for each item.

©
Unisa 2023
 i TAX3761
Test 3 July 2023

SCHEDULES

A. 2023 TAX TABLES

(i) Persons (other than companies and trusts)

Taxable income Rates of tax

Where the taxable income does not exceed R226 000 18% of each R1 of the taxable income;

exceeds R226 000 but does not exceed R353 100 R40 680 plus 26% of the amount by which
the taxable income exceeds R226 000;

exceeds R353 100 but does not exceed R488 700 R73 726 plus 31% of the amount by which
the taxable income exceeds R353 100;

exceeds R488 700 but does not exceed R641 400 R115 762 plus 36% of the amount by which
the taxable income exceeds R488 700;

exceeds R641 400 but does not exceed R817 600 R170 734 plus 39% of the amount by which
the taxable income exceeds R641 400;

exceeds R817 600 but does not exceed R1 731 600 R239 452 plus 41% of the amount by which
the taxable income exceeds R817 600;

exceed R1 731 600 R614 192 plus 45% of the amount by which
the taxable income exceeds R1 731 600.

B. FRINGE BENEFIT TABLES

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

SCALE OF
VALUES

Fixed Fuel Maintenance

Where the value of the vehicle cost cost cost
R c c

does not exceed R95 000 .............................................. 29 836 131.7 40.9

exceeds R 95 000 but does not exceed R190 000 ......... 52 889 147.0 51.1
exceeds R190 000 but does not exceed R285 000 ........ 76 033 159.7 56.3
exceeds R285 000 but does not exceed R380 000 ........ 96 197 171.8 61.5
exceeds R380 000 but does not exceed R475 000 ........ 116 438 183.8 72.3
exceeds R475 000 but does not exceed R570 000 ........ 137 735 210.8 84.9
exceeds R570 000 but does not exceed R665 000 ........ 159 031 218.0 105.5
exceeds R665 000......................................................... 159 031 218.0 105.5

(ii) Prescribed rate of reimbursive travel expenses R4.18 per kilometre

 ii TAX3761
Test 3 July 2023

(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 R152 per day.

Daily allowance for food and incidental cost is R493 per day.

C. REBATES

Persons under 65 ..................................................................................................................... R16 425

Persons 65 and under 75 (R16 425 + R9 000)...................................................................... R25 4 25

Persons 75 and over (R16 425 + R9 000 + R2 997) .............................................................. R28 422

D. MEDICAL AID TAX CREDITS

Main member R347

Main member with one dependant (R347 + R347) R694

Main member with two dependants (R347 + R347 + R234) R928

Each additional dependent qualifies for a further rebate or credit of R234.

 iii TAX3761
Test 3 July 2023

E. INCOME TAX MONETARY THRESHOLDS SUBJECT TO PERIODIC LEGISLATIVE

CHANGE:

Description Reference to Income Tax Monetary

Act, 1962 amount
Exemption for interest and certain dividends:

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

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

Capital gains exclusions:

Annual exclusion for individuals and special trusts Paragraph 5(1) of R40 000
Eighth schedule
Exclusion on death Paragraph 5(2) of R300 000
Eighth schedule
Paragraph 45(1)(a) of Eighth R2 million
Exclusion for the disposal of a primary residence
Schedule
Exclusion in respect of disposal of primary resi- Paragraph 45(1)(b) of Eighth R2 million
dence (based on amount of proceeds on dispo- Schedule
sal)
Maximum market value of all assets allowed with- Definition of small R10 million
in the small business definition on disposal when busi in paragraph
person 55 years or older 57(1) of Eighth Schedule
Exclusion amount on disposal of small business Paragraph 57(3) of R1 800 000
when person 55 years or older Eighth schedule
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
deemed 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
 iv TAX3761
Test 3 July 2023

Description Reference to Income Tax Monetary

Act, 1962 amount

Employment-related fringe benefits

Exempt scholarships and bursaries:
Employers can provide exempt scholarships and
bursaries to employees and their relatives, sub-
ject to annual monetary ceilings.
Annual ceiling for employees Paragraph (ii)(aa) of the R600 000
proviso to section 10(1)(q)
Annual ceiling for employee relatives Paragraph (ii)(bb) of the R60 000 &
proviso to section 10(1)(q) R20 000
Annual ceiling for employee relatives with R90 000 &
a disability R30 000
Awards for bravery and long service: Paragraphs (a) and (b) of R5 000
the further proviso to para-
graph 5(2) of Seventh Sche-
dule
Employee accommodation: Paragraph 9(3)(a)(ii) of R91 250
Seventh Schedule
Exemption for de minimus employee loans: Paragraph 11(4)(a) of R3 000
Seventh Schedule
Administration
Exemptions from provisional tax:

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

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