QUESTION  | TOPIC  | MARKS  | MINUTES
1  | Value-Added Tax (VAT)  | 25  | 30
2  | Net normal tax liability  | 30  | 36
3  | Fringe benefits and Travel Allowance  | 25  | 30
4  | Gross Income and Capital Gains Tax  | 20  | 24
Total  | 100  | 120
4 TAX1501/201/1
QUESTION 1 (25 marks, 30 minutes)
Forever Diamonds (Pty) Ltd carries on a business as a manufacturer of jewelry and is also a
jewelry retailer. The company runs its manufacturing operations in Johannesburg and has three
retail stores located in Far City, Home-way and Wow Shopping Centres. The company is a vendor for Value-Added Tax (VAT) purposes and is registered on the invoice basis.
The company had the following income and expenditure for the two-month tax period ending on
31 March 2020. All amounts include VAT at 15%, unless otherwise stated.
R
Income
Bad debts recovered  | 76 667
Cash sales  | 966 000
Insurance payout on stolen stock  | 843 334
Interest earned on current account held with SABA Bank  | 46 000
Invoices of credit sales  | 230 000
Sale of glass jewelry display counters  | 184 000
Sale of jewelry exported to foreign customers  | 575 000
Expenditure
Auditor’s fees  | 23 000
Bank charges  | 8 050
Credit note issued to customers on a sale previously included in
income | 2 300
Depreciation  | 50 000
Entertainment of customers  | 15 000
Fees for exchanging currency  | 3 000
Fuel expenses  | 9 500
Municipal electricity  | 11 500
Printing and stationery  | 9 200
Purchase of second hand cellphones from a non-vendor  | 1  | 28 750
Rental of coffee machine for employees’ use  | 4 500
Rental of the three retail store’s space in shopping malls  | 582 284
Salaries and wages  | 450 000
Stock purchased  | 862 500
Telephone  | 5 750Additional information:
1. R28 750 was paid in cash for second hand cellphones purchased from a non-VAT vendor.
The market value of the second hand cellphones on the date of purchase was R30 000.
REQUIRED:  | Marks
Determine the value added tax payable by / refundable to Forever Diamonds
(Pty) Ltd for the two-month tax period ending 31 March 2020. (Please provide
reasons for not claiming input VAT or not accounting for output VAT).  | 25
5 TAX1501/201/1
QUESTION 2 (30 marks, 36 minutes)
Lenny (35 years old) is the sales manager for a chain of hardware stores. He is married out of
community of property to Lucia and has a three-year-old child. Lenny’s receipts, benefits and
expenses for the 2019 year of assessment are listed below:
Notes  | R
RECEIPTS/BENEFITS
Salary  | 420 000
Bonus  | 18 000
Use of a laptop  | 1  | ?
Dividends received – South African listed company  | 60 000
Foreign dividends received (not from a tax-free investment)  | 5 000
Foreign interest received (not from a tax-free investment)  | 22 000
Local interest received (not from a tax-free investment)  | 85 000
EXPENSES
Meals  | 2  | 5 300
Current pension fund contributions  | 3  | 32 000
Current retirement annuity fund contributions  | 3  | 130 000
Medical expenses  | 4  | 36 000Notes:
1. Lenny’s employer granted him the right of use of a company owned laptop from 1 June 2019 to
31 December 2019. Lenny had to pay R100 per month for the use thereof. The laptop cost the
employer R12 500 on 1 April 2019 and the market value on the date Lenny received the right of use
of the laptop was R11 500.
2. Lenny is a diabetic and has to eat specific meals at regular intervals. Lenny spent R5 300 on meals
while he was required to work overtime.
3. Lenny’s total contributions to a pension fund, from 1 March 2019 until the end of the year of assessment amounted to R32 000. Lenny also contributed an amount of R130 000 to a retirement annuity
fund during the year of assessment. Lenny’s employer did not contribute to any of these funds on
Lenny’s behalf. You may assume that his remuneration for the 2020 year of assessment amounted
to R449 306.
4. Lenny is a member of a registered medical scheme. His wife and child are registered as his dependents on the scheme. His wife has a disability as defined.
The following are details from Lenny’s medical scheme statement for the year of assessment:
Medical scheme contributions for the year | R
22 000
Medical expenses not re-imbursed by the medical scheme and paid by Lenny  | 14 000
Total medical costs for the year  | 36 000In addition to the above medical scheme contributions, Lenny’s employer also contributed R11 000
to the medical scheme, on his behalf.
REQUIRED:  | MARKS
Calculate Lenny’s net normal tax liability for the year of assessment ended
29 February 2020.  | 30
6 TAX1501/201/1
QUESTION 3 (25 marks, 30 minutes)
Bill Obed is 43 years old and is employed at Media Originators (Pty) Ltd. On 1 March 2019, he
was promoted to Senior Account Executive Manager. His promotion allows him to restructure his
remuneration package.
His employer gave him the option to either choose:
1. A travel allowance of R 12 500 per month for the full year of assessment, or
2. The free use of a company car for the full year of assessment
Bill will keep a detailed logbook of all kilometres travelled and accurate records of all expenses
that he will incur.
Bill’s estimated kilometres travelled:
km
Total kilometres  | 40 000
Private kilometres  | 15 000OPTION 1: Travel allowance (17 marks, 20 minutes)
A travelling allowance of R12 500 per month for the use of his own car with effect from 1 March
2019 for the full year of assessment. Bill will purchase the vehicle for R 500 000 (including VAT).
Bill’s estimated vehicle expenses are:
R
Licence and insurance  | 15 200
Fuel expenses  | 30 300
Maintenance costs  | 15 000OPTION 2: Use of a company car (8 marks, 10 minutes)
If Bill elects the right of use a company-owned vehicle, the company will purchase the vehicle for
R500 000 (including VAT and a three-year maintenance plan). All expenses in relation to his
travel will be borne by his employer.
REQUIRED:  | MARKS
You are required to calculate the most favourable tax benefit of the two options
for the year of assessment ending 29 February 2020.
Hint: Calculate the taxable portion of both the options and draw a conclusion. | 25
7 TAX1501/201/1
QUESTION 4 (20 marks, 24 minutes)
PART A
Mark is employed by an international estate agent company specialising in property. During the
2020 year of assessment the company donated a house to Mark, valued at R2 500 000, to reside
in with his family. The house was registered in Mark’s name during the 2020 year of assessment.
REQUIRED:  | MARKS
Discuss with reference to the gross income definition, whether the receipt of the
house should be included or excluded from Mark’s gross income for the 2020 year
of assessment. | 6PART B
Pebo Hadebe sold the following asset during the 2020 year of assessment.
Primary residence
Pebo sold his primary residence for R3 500 000 on 30 September 2019. The sales commission
on the property amounted to R175 000. He purchased the property on auction on 1 February
2000 for R1 250 000. In 2010, Pebo spent R10 000 on repairs to the geyser and R150 000 on
improvements to the kitchen. The property was valued at R1 500 000 on 1 October 2001. The
time apportionment base cost is R1 300 000.
Other capital gains amounted to R600 000 for Pebo for the 2020 year of assessment.
REQUIRED:  | MARKS
Calculate the taxable capital gain/capital loss of Pebo Hadebe for the 2020 year of
assessment.  | 14
8 TAX1501/201/1
SCHEDULES
A. 2020 – TAX TABLES
(i) Persons (other than companies and trusts)
Taxable income  | Rates of tax
Where the taxable income does not exceed R195 850  | 18% of each R1 of the taxable income;
exceeds R195 850 but does not exceed R305 850 .... | R35 253 plus 26% of the amount by which the
taxable income exceeds R195 850;
exceeds R305 850 but does not exceed R423 300 .... | R63 853 plus 31% of the amount by which the
taxable income exceeds R305 850;
exceeds R423 300 but does not exceed R555 600 .... | R100 263 plus 36% of the amount by which the
taxable income exceeds R423 300;
exceeds R555 600 but does not exceed R708 310 .... | R147 891 plus 39% of the amount by which the
taxable income exceeds R555 600;
exceeds R708 310 but does not exceed R1 500 000 . | R207 448 plus 41% of the amount by which the
taxable income exceeds R708 310;
exceed R1 500 000 .................................................... | R532 041 plus 45% of the amount by which the
taxable income exceeds R1 500 000.B. FRINGE BENEFIT TABLES
(i) Employee–owned vehicles (section 8(1))
SCALE OF VALUES
Where the value of the vehicle | Fixed
cost
R | Fuel
cost
c | Maintenance
cost
c
does not exceed R85 000.............................................
exceeds R 85 000 but does not exceed R170 000 .......
exceeds R170 000 but does not exceed R255 000 ......
exceeds R255 000 but does not exceed R340 000 ......
exceeds R340 000 but does not exceed R425 000 ......
exceeds R425 000 but does not exceed R510 000 ......
exceeds R510 000 but does not exceed R595 000 ......
exceeds R595 000 | 28 352
50 631
72 983
92 683
112 443
133 147
153 850
153 850 | 95,7
106,8
116,0
124,8
133,5
153,2
158,4
158,4 | 34,4
43,1
47,5
51,9
60,9
71,6
88,9
88,9
9 TAX1501/201/1
(ii) 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
(iii) Subsistence allowance as per Government Gazette No. 39724
Daily allowance for incidental cost is R134 per day.
Daily allowance for food and incidental cost is R435 per day.
C. REBATES
Persons under 65................................................................................................................. R14 220
Persons 65 and under 75 (R14 220 + R7 794) .................................................................... R22 014
Persons 75 and over (R14 220 + R7 794 + R2 601 ) ........................................................... R24 615
D. MEDICAL AID TAX CREDITS
Main member R310
Main member with one dependant (R310 + R310) R620
Main member with two dependants (R310 + R310 + R209) R829
Each additional dependant qualifies for a further rebate or credit of R209.
10 TAX1501/201/1
E. INCOME TAX MONETARY THRESHOLDS SUBJECT TO PERIODIC LEGISLATIVE CHANGE:
Description  | Reference to Income Tax
Act, 1962 | Monetary
amount
Exemption for interest and certain dividends:
In respect of persons 65 years or older, exemption
for interest from a source within the Republic which
are not otherwise exempt | Section 10(1)(i)(i)  | R34 500
In respect of persons younger than 65 years,
exemption for interest from a source within the
Republic which are not otherwise exempt | Section 10(1)(i)(ii)  | R23 800
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 Eighth
schedule | R40 000
Exclusion on death  | Paragraph 5(2) of Eighth
schedule | R300 000
Exclusion for the disposal of a primary residence  | Paragraph 45 Schedule (1)(a) of Eighth  | R2 million
Exclusion in respect of disposal of primary residence
(based on amount of proceeds on disposal) | Paragraph 45(1)(b) of Eighth
Schedule | R2 million
Maximum market value of all assets allowed within
the small business definition on disposal when
person 55 years or older | Definition of “small business”
in paragraph 57(1) of Eighth
Schedule | R10 million
Exclusion amount on disposal of small business
when person 55 years or older | Paragraph 57(3) of Eighth
schedule | R1 800 000
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 retirement
funds | Proviso to section 11(k)(i)  | R350 000
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)  | R595 000
Ceiling on debt relating to vehicle cost  | Section 8(1)(b)(iiiA)(bb)(B)  | R595 000
11 TAX1501/201/1
Description  | Reference to Income Tax
Act, 1962 | Monetary
amount
Employment–related fringe benefits
Exempt scholarships and bursaries:
Employers can provide exempt scholarships and
bursaries to employees and their relatives, subject
to annual monetary ceilings.
Annual ceiling for employees  | Paragraph (ii)(aa) of the
proviso to section 10(1)(q) | R600 000
Annual ceiling for employee relatives
Annual ceiling for employee relatives with a disability | Paragraph (ii)(bb) of the
proviso to section 10(1)(q) | R60 000 &
R20 000
R90 000 &
R30 000
Awards for bravery and long service:  | Paragraphs (a) and (b) of the
further proviso to paragraph
5(2) of Seventh Schedule | R5 000
Employee accommodation:  | Paragraph 9(3)(a)(ii) of
Seventh Schedule | R78 150
Exemption for de minimus employee loans:  | Paragraph 11(4)(a) of Seventh
Schedule | R3 000
Administration
Exemptions from provisional tax:
In the case of a natural person not carrying on a
business | Paragraph 18(1)(c)(i) of
Fourth Schedule | Taxable in
come below
threshold
In the case of a natural person not carrying on a
business | Paragraph 18(1)(c)(i) of
Fourth Schedule | Taxable in
come from
interest, fo
reign divi
dends and
rental in
come does
not exceed
R30 000