Instructions

1. Notes may be made on question papers.

2. The paper consists of 9 pages.
3. You are reminded that answers may NOT be written in pencil.
4. All questions must be answered.
5. Show all calculations.
6. The amount of marks indicated opposite the requirement(s) provides an indication of the length
and detail required for your answer.
7. Answer the questions by making use of:
a. effective ordering and exposition;
b. meaningful explanations;
c. logical arguments; and
d. non-dubious and concise language use
8. Please start each question on a new page.
9. Round all amounts to the nearest Rand.

Appendix A - Normal tax rates for natural persons: 2019 year of assessment
Appendix B - Employee-owned vehicles (section 8(1)) 2019

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QUESTION 1 (35 marks, 63 minutes)

Nollie Ramada is a commentator employed by a local radio station, Radio Today (Pty) Ltd. Nollie is
43 years old, is married (out of community of property) and a resident of South Africa.

Nollie, who is a full-time employee of Radio Today (Pty) Ltd, enjoyed the following benefits from it
during the 2019 year of assessment.

 A cash salary of R33 000 a month.

 A cash bonus of R38 500 paid to him in December 2018.
 The use of a motor car that was purchased by Radio Today (Pty) Ltd during the 2018 year of
assessment at a cost of R345 000 (R300 000 plus value added tax (VAT) of R45 000). Nollie
has had the use of this motor car from the date it was purchased by Radio Today (Pty) Ltd The
company bears all the maintenance costs of this vehicle. Nollie is required to pay for all its fuel
costs. During the 2019 year of assessment
During his one month leave, Nollie ‘returned’ his ‘company car’ to Radio Today (Pty) Ltd (at its
request) so that it could be used by another commentator who required transport during the
period. During the 11-month period that Nollie had the use of the vehicle, he travelled a total of
21 500 kilometers in it, of which 15 950 kilometers were for private purposes.
 The free use of a notebook computer purchased by Radio Today (Pty) Ltd for R18 400 (including
VAT). The use of the notebook computer was given to Nollie (on the same day of purchase) to
enable him to prepare his broadcasts. Nollie spent a negligible amount of time on private tasks
on the notebook computer.
 In the beginning of August 2018 Nollie was given the option to purchase this notebook computer
from Radio Today (Pty) Ltd for R10 350 (including VAT) being its book value in the accounting
records. Nollie took up this option and purchased it because he knew its market value was
R14 670 (including VAT) having read an advertisement for a similar second-hand notebook
computer in a local newspaper.
 Radio Today (Pty) Ltd offered Nollie the free use of its holiday cottage. Nollie accepted the offer
and for 10 days during December 2018 he and his wife enjoyed a vacation. If the holiday cottage
is not used by an employee of Radio Today (Pty) Ltd, it is up for rent to non-employees at a
daily rate of R1 750.
 On 31 December 2018 Nollie was awarded a gold watch with a market value and cost price of
R6 000. He received this award because he had now completed 20 years’ service to Radio
Today (Pty) Ltd. He has not received any long service awards before this.
 Nollie is the main member of Radio Today (Pty) Ltd’s medical scheme. Under the rules of this
medical scheme, the employer and employee are each liable for 50% of the monthly
contribution. For the 2019 year of assessment, Nollie’s monthly contribution is R2 600 (of which
he paid R1 300 and Radio Today (Pty) Ltd the other R1 300). The contributions covered Nollie
and his wife.
During the year he paid R14 650 in the form of qualifying medical cost which were not refunded
/ paid by the medical aid fund.
 Nollie is also a member of Radio Today (Pty) Ltd’s “non-contributory” provident fund.
Contributions made to the provident fund for Nollie’s membership by Radio Today (Pty) Ltd
during the 2019 year of assessment were R29 700.
 A cell phone was provided to Nollie by Radio Today (Pty) Ltd. The company incurred total
expenditure of R17 800 on the cell phone. Nollie used the cell phone mainly for business
purposes.

 Radio Today (Pty) Ltd pay the following subscription fees on behalf of Nollie:

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 o The yearly ICASA (Independent Communication Authority of South Africa) subscription fee
of R750. It should be noted that one may not be a commentator without such a license.
o Monthly subscription fee of R195 to enable Nollie to attend and practice at a gymnasium. A
sports commentator should look his best.

 Nollie’s niece (who does not have a disability as defined) also wants to become a radio
commentator. Radio Today awarded her a bursary of R70 000 per year to study journalism at a
local university. The degree which she studies for, had been allocated a NQF level of 5. Nollie’s
remuneration proxy does not exceed R600 000.

In addition to the amounts listed above, Nollie had the following receipts and accruals during the
2019 year of assessment:
 Interest of R34 560 received from his investment.
 Interest the equivalent of R4 300 from a bank account in Australia.
 Local dividends of R300.
 He is entitled to R6 000 per month for a flat that is being rented out, on his behalf, by an agency.
He then has to pay the agency a 10% commission. The commission amount is automatically
deducted from the rental income before the agency pay him the net income.
 Nollie is a beneficiary of a family trust. He receives R10 000 monthly from this trust.
 It should be noted that Nollie and his wife do not have children of their own. They are however
very involved with a local orphanage, and over and above spending much time with the children,
they also contribute financially. In the current year of assessment Nollie and his wife together
equally donated R50 000 to this institution. The orphanage is registered with SARS as a PBO,
and Nollie and his wife did receive the necessary receipt from the orphanage.
Nollie paid R7 800 in provisional tax and his employer had withheld R115 000 in the form of
employees’ tax.

REQUIRED MARKS

Calculate the normal tax liability for Nollie Ramada for the 2019 year of assessment in
terms of the Income Tax Act No. 58 of 1962. Section numbers and other reasons are
not required but you must show your calculations clearly. 35

TOTAL MARKS 35

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QUESTION 2 (10 marks, 18 minutes)

This question consists out of two parts. Answer both.

PART A

Lily Thato

Lily bought some shares as an investment in a local company 10 years ago. She has been receiving
dividends from this investment for years now. In 2019, she received dividends of R25 000. In the
same year she decided to sell her whole share portfolio for R300 000.

Karabo Glens

During the year of assessment Karabo lost her uncle. The will stated that Karabo will receive R10 000
per year for a period of 10 years, out of his estate.

Queen Daniels

In 2019, Queen and Obakeng settled their divorce case in the High Court. In terms of the divorce
order Obakeng is liable to pay R8000 per month to Queen as maintenance.

PART B

Amy Cooper

Amy incurred the following expenses during the year of assessment when she started working at her
new job as a receptionist. She would like to know if she can deduct these expenses from her gross
income.

 She purchased a personal laptop for R9 000 to use at home when she has some extra work
to do and to use for her studies as she wants to complete her degree in Public Administration.
 She incurred travelling expenses of R3 200 for her trips to and from work. She is of the
opinion that the amount must be deductible in the determination of her taxable income since
if she did not go to work then she would not be paid.
 She has a standing monthly appointment with her beautician for a facial, manicure and
pedicure. At the end of the 2019 year of assessment, these appointments amounted to
R4 300. She also changed her wardrobe for a more professional look at R15 000 during the
2019 year of assessment.

(Take note: Required follows on the next page)

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 REQUIRED MARKS

a) PART A 7
Briefly discuss whether the amounts received by (or accrued to) the respective
taxpayer, in each of the above situations, will constitute income as defined.
You are required to motivate your answer by supplying the correct section
number of the Income Tax Act 58 of 1962.

b) PART B 3
Briefly discuss whether the amounts paid by Amy Cooper will be deductible during
the 2019 year of assessment.
You are not required to supply any section numbers and/or court cases as part of
your discussion

TOTAL MARKS 10

QUESTION 3 (10 marks, 18 minutes)

1. In this method of tax, the tax rate increases with the amount of income earned.
2. Taxes levied on the sale or use of commodities. The taxes take form of price increases and are
paid by the person purchasing the commodity.
3. In this court case, it was held that a person is an ordinarily resident in the country to which they
would naturally return to from their ‘wanderings’.
4. A good tax system has four principles, one of the principles states “Every tax should be levied
at the time or in the manner most convenient for the contributor to pay it’’.
5. Tax levied at a fixed rate.
6. Tax levied on the value of “property” (as defined) disposed of in terms of a donation by a
resident.
7. Benefits received by an employee from an employer as a result of their employment in the form
of cash or other benefits other than a salary.
8. Employee tax withheld by the employer from the monthly remuneration that the employer pays
to the employee.
9. The method of collecting tax from taxpayers who earns income that is not remuneration. The
tax is normally collected on a six months’ basis.
10. Tax levied on all of a person’s assets at the date of death irrespective of where the assets are
located.

REQUIRED MARKS

For each of the above statements, provide the correct term/name that is described 10
within the statements.
Example:
Statement: Tax levied on income earned
Answer : Income tax

TOTAL MARKS 10

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QUESTION 4 (30 marks, 54 minutes)

NOTE: This question consists of three parts – all relate to Jules Makwere – he was born in Mauritius
and often returns there to visit his family for his month annual leave. He has been employed by the
same company for the past 15 years – 10 of which he spent in the Republic. You can accept that he
is a resident of South Africa for income tax purposes. He is divorced and will turn 50 during the 2019
year of assessment.

He had the following tax related incomes and expenses during the 2019 year of assessment:

Salary – per month R45 000 540 000

Bonus – December 85 000

Contribution to pension fund – R8 000 per month 96 000

Medical aid contribution –R4 000 per month 48 000

Rental from a flat in Sandton 120 000

Royalties received from a Republic publisher of his book Afr/French in Africa 160 000

Interest received from a Mauritian bank 56 000

He received the following income tax assessments:

- His 2018 tax assessment on 26 August 2018 for R678 000 taxable income;
- His 2017 tax assessment on 20 August 2018 for R612 000;
- His 2016 tax assessment on 1 January 2018 for R486 000.

Jules had a cancer scare and decided to give some of his monies and assets away. He made the
following donations on 30 November 2018:

1. The flat in Sandton, valued at R1 500 000 to his daughter – 26 years old

2. A holiday house in Mauritius which he inherited from his Mauritian grandmother who never
travelled off the island. The house is valued at R1400 000.

3 400 Shares listed on the stock exchange – valued at R25 per share to his brother.

4 A diamond ring worth R156 000 to his ex-wife.

5 To his favourite South African political party R20 000.

6 His Mercedes Benz valued at R340 000 to his best friend to use December and to keep if
Jules dies and does not return from Mauritius on 1 January 2019.

7 R100 000 to the old age home his mother lives in in Johannesburg for her upkeep for 2019.

8 His share in a hotel in Cape Town to a trust for his daughter – the share is valued at
R35 000 000.

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 REQUIRED MARKS

a) Calculate the employees’ tax that his employer must deduct for 10
December 2018. Separately show the amount of employees’ tax caused by his
bonus.

b) Calculate and fully motivate his first provisional tax payment for the 2019 year
of assessment and indicate clearly on which date it is due. Assume PAYE of 10
R7500 per month.

c) Calculate the donations tax payable by Jules on the donations listed above.
Clearly show when a donation is exempt and give the reasons and section 10
numbers for that
Write your answer in accordance with the columns given below

What is Amount Exempt or not and Taxable @

donated Reason / Section for amount donations
exemption tax rate

TOTAL MARKS 30

QUESTION 5 (15 marks, 27 minutes)

The following information relates to the estate of the late Mrs Pretty Masilo:

 Pretty was a holder of a fiduciary right over a block of apartments in Sandton. The apartments
had a market value of R1 000 000. The fiduciary right was correctly calculated to the value of
R795 612.

 The primary residence valued at R5 000 000 by a sworn appraiser.

 Her collection of paintings, at date of her death the paintings were valued for R2 500 000.

 The executor sold her house in London for R4 200 000. She bought the house while she was
attending a conference on behalf of her South African employer. She remained a resident of South
Africa at the time.

Other assets:

 A fixed deposit account with the balance of R 1 500 000 (including interest of R 32 500 up to the
date of her death and R45 000 thereafter).

 Listed shares in a local company market value R1 100 000.

 Vehicle valued at R590 000, sold by the executor for R550 000.

 Cash and cash equivalents R 800 000.

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The following administration costs and liabilities were incurred:

 Hospital and death bed expenses R 36 500.

 Funeral services (including a wreath of R590) R60 000

 Bank charges on the estate account R 650

 Advertising fees in the local newspaper for creditors and other administrations R 750.

 Executor’s fee and Master’s fee in accordance with the prescribed rate. The Executor is not a VAT
vendor.

Pretty Masilo’s will stipulated the following:

 Primary residence, shares and fixed deposits bequeathed to her husband.

 Cash and paintings bequeathed to a SPCA which is exempt from tax. The SPCA is registered as
a Public Benefit Organisation.

 The rest of the estate will be divided equally amongst Alice’s children aged 34, 26 and 22 years
old.

REQUIRED MARKS

Calculate the estate duty payable by Pretty Masilo’ at her death. Provide reasons, in 15
the form of section numbers from the Estate Duty Act, No. 45 of 1955, for categories
of exemptions and deductions only. You need not to show who is liable to pay this
estate duty.

TOTAL MARKS 15

END OP PAPER
TOTAL: 100

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APPENDIX A

Normal tax rates for natural persons: 2019 year of assessment

TAXABLE INCOME RATES OF TAX

R0 – R195 850 + 18% of each R1

R195 851 – R305 850 R35 253 + 26% of the amount above R195 850

R305 851 – R423 300 R63 853 + 31% of the amount above R305 850

R423 301 – R555 600 R100 263 + 36% of the amount above R423 300

R555 601 – R708 310 R147 891 + 39% of the amount above R555 600

R708 311 – R1 500 000 R207 448 + 41% of the amount above R708 310

R1 500 001 and above R532 041 + 45% of the amount above R1 500 000

APPENDIX B:
Employee owned vehicles (section 8(1))

Value of the vehicle (including

VAT) Fixed cost Fuel cost Maintenance cost

R p.a. c/km c/km

0 - 85 000 28 352 95.7 34.4

85 001 - 170 000 50 631 106.8 43.1

170 001 - 255 000 72 983 116.0 47.5

255 001 - 340 000 92 683 124.8 51.9

340 001 - 425 000 112 443 133.5 60.9

425 001 - 510 000 133 147 153.2 71.6

510 001 - 595 000 153 850 158.4 88.9

more than 595 000 153 850 158.4 88.9

File reference: 8.1.7.2.2

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