Employees Tax Practice Questions

Question 1
Canterwood Ltd (RSA resident) is a pharmaceutical company and a public
company for tax purposes. All the full-time employees are members of the
company’s pension fund.
The employees must make a 10% contribution and the company a 5%
contribution of basic salary, according to the rules of the fund. The company
does not have a medical scheme but is willing to deduct the contributions from
the employees’ salaries and to pay the fund on behalf of its employees. The
company is also willing to withhold any retirement annuity fund (RAF)
contributions and to pay the fund on behalf of the employees. The company is
also willing to take the above-named contributions into account when calculating
the employees’ tax liability. You are busy with an audit on employees’ tax for
SARS. Mbali Mthembu is one of the employees of Canterwood Ltd who has been
selected for verification purposes.
Mbali Mthembu is 30 years old and married. She is a full-time employee and a
representative of the company. She spends most of her working time on the road
and visits medical doctors in the Gauteng area. Mbali was in employment of her
employer for the full year, and her remuneration package and benefits for the
current year of assessment were as follows:
1. Her pension fund contributions are calculated on her basic salary of R30 000
a month.
2. Commission is awarded on a monthly basis. She earned R120 000
commission in total for the year.
3. The company deducted her retirement annuity fund contributions of R1 000 a
month from her salary and paid it over on her behalf.
4. Mbali contributed R4 500 per month to a medical scheme in which her
husband and two minor children are listed as dependents. She also incurred
R18 000 in additional qualifying medical expenses.
5. Mbali had the use of the employer’s vehicle for the entire year of assessment.
The determined value of the vehicle is R250 000 (including VAT) and the
 employer carries all costs relating to the vehicle. The vehicle is not subject to
a maintenance plan.
6. The employer awarded a bursary of R20 000 to her to enrol for a diploma in
marketing at UNISA. She has agreed to repay back the amount of bursary
money to the employer if she does not complete the course.

YOU ARE REQUIRED TO calculate the employees’ tax for Mbali that the
employer had to withhold in total for the year of assessment ending 29
February 2020.

Employees Tax Practice Question Answer

Balance of remuneration for the year of assessment ending 28 February 2019:
R
Salary: R30 000 × 12 months 360 000
Commission 120 000
Employer pension fund contributions (5% × R30 000 × 12) 18 000
Bursary Nil
Use of company vehicle: R250 000 × 3.5% × 12 months × 80% 84 000
Remuneration 582 000
Less: Pension fund and retirement annuity fund contributions of
R66 000 ((R30 000 × 15% × 12 months) + (R1 000 x 12 month))
Limited to the lesser of R350 000 or R154 550 (27.5% of remuneration of R562 000)
Thus, actual contributions of R66 000 (66 000)
Balance of remuneration (and annual equivalent) 516 000
Schedule tax on R516 000:
On R423 300 100 263
On R92 700 (R516 000 – R423 300) at 36% 33 372 133 635
Less: Primary rebate (14 220)
Total employees’ tax 119 415
Question 2

Jade Monroe is 30 years old and married. She is employed as a medical examiner with
the South African Police Service (SAPS). She spends most of her working time on the
road and visits medical doctors in the Gauteng area. Jade was in employment of her
employer for the full year, and her remuneration package and benefits for the month of
January 2018 were as follows:
1. Her pension fund contributions are calculated on her basic salary of R30 000 a
month.
2. Jade makes a 10% contribution and SAPS makes 5% contribution of her basic
salary towards her pension fund.
3. During the month she earned R12 000 in commission.
4. The company deducts her retirement annuity fund contributions of R1 000 a
month from her salary and paid it over on her behalf.
5. Jade uses her employer’s vehicle. The determined value of the vehicle is R250
000 (including VAT) and the employer carries all costs relating to the vehicle. The
vehicle is not subject to a maintenance plan. Jade did not book any business
trips during the month.
6. The employer awarded a bursary of R20 000 to her to enroll for a diploma in
marketing at UNISA. If she does not complete the course she has to repay the
amount.
7. The house she stays in is owned by her employer. She pays her employer
R3 000 per month. The house is unfurnished and is provided with water and
electricity services.
8. Jade’s remuneration from her employer in the previous year of assessment
comprised a cash salary of R300 000 only.

YOU ARE REQUIRED TO:

1.1. Calculate the employees’ tax For Jade that the employer had to withhold for the
month of January 2020.
1.2. Calculate the amount of cash to be deposited into Jade’s bank account from her
remuneration package.

Jade Monroe
Balance of remuneration for the 31 January 2018
R
Salary: 30 000
Commission 12 000
Employer pension fund contributions (5% × R30 000 × 1) 1 500
Residential accommodation:
Rental value =
(R300 000 – R75 750) x 18/100 x 1/12- R3 000 364
Bursary (Exempt as she will pay back) Nil
Use of company vehicle: R250 000 × 3.5% × 1 months × 80% 7 000
Remuneration 50 864
Less: Pension fund and retirement annuity fund contributions of
R5 500 ((R30 000 × 15%) + (R1 000)
Limited to the lesser of R29 167 (R350 000/12) or R13 988 (27.5% of
remuneration of R50 864)
Thus, actual contributions of R5 500 (5 500)
45 364
Balance of remuneration (and annual equivalent) (R45 364 x 12) 544 368
Schedule tax on R544 368:
On R423 300 R100 263
On R121 068 (R544 368 – R423 300) at 36% R43 584 143 847
Less: Primary rebate (14 220)
Total employees’ tax 129 627
Tax payable in January 2018: R129 627/12 R10 802.25
Cash Component (30 000 + 12 000) 42 000
Less tax paid (10 802.25)
Net pay 31 197.75