COLLEGE OF ACCOUNTING SCIENCES

DEPARTMENT OF TAXATION

TEST 3 – 31 JULY 2024

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.
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Test 3 July 2024

The IRIS invigilation tool

Day of the assessment instructions:

• Students must ensure that their laptop/computer is fully functional, and IRIS enabled, prior to the
assessment sitting.
• At the start of your assessment, please ensure you have activated the IRIS proctoring tool for
invigilation of your assessment session.
• Students must note that the IRIS invigilation tool monitors the student’s computer/laptop screen
which includes browser/internet activity.
• IRIS will be monitoring you from the start of the download time until the end of the upload
time.
• The final submission of your assessment must be made on the cas.myexams portal and this is
the only valid submission that will be accepted by the university.
• Students are reminded that their participation in the invigilation through IRIS is compulsory.
• Students who have not utilised invigilation or proctoring tools (IRIS) will be deemed to have
transgressed Unisa’s examination rules and will have their marks withheld. In addition, IRIS will
flag suspicious behaviour throughout the assessment which will be reviewed by the exams
department to establish any possible academic dishonesty. Consequently, affected students may
not receive their assessment results until the disciplinary processes have been concluded.

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 10:30 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 11:00 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, space, 03. For example: 33445566 TAX3761 03.

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 TAX3761-24-Y to open the assessment portal.
• Under the applicable module you will find a TAB to access your paper – Test 3 (visible when the
time for the test starts):

Follow these steps to submit your answer script:

• Open the folder TAX3761-24-Y on the cas.myexams.unisa.ac.za platform.

• You will do your submission in the same 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.
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Test 3 July 2024

• 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 BEFORE 11:00.
• The cas.myexams.unisa.ac.za portal closes promptly at 11:00.
• 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 (“The submission is my own work”) 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.
• 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 as “read-only” files).
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, within the permitted allocated time frames.
5. Incorrect file format and uncollated answer scripts will not be considered.
6. A mark awarded for an incomplete submission will be the student’s final mark. No opportunity for
resubmission will be granted.
7. A mark awarded for illegible scanned submission will be the student’s 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 10:30 to 11:00. Submissions made after the official cut-off time (11:00) will be
rejected and will not be marked.
12. Queries that are beyond Unisa’s control include the following:
a. Personal network or service provider issues.
b. Load shedding/limited space on personal computer.
 4 TAX3761
Test 3 July 2024

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 2024

QUESTION 1 (40 marks, 72 minutes)

Fabian Julies (Fabian) (63 years old) is the marketing manager for a South African bakery company
(Bakery Bonanza (BB)). Fabian does not own any of BB’s equity shares. Fabian is married out of
community of property to Marianne. Marianne owns a bakery business in her own name. They have a
24-year-old daughter (Shamsi) and a 19-year-old son (Douglas). Shamsi is married, studies full-time at a
public educational institution (approved by the Commissioner), works part-time as a model, is partially
dependent on her parents, she, and her husband (James, a part-time student) lives in Fabian’s flat and
her modelling income is below the tax threshold. Douglas commenced with an internship as a baker at
Marriane’s bakery, lives with his parents, is partially dependent on them and his income is below the tax
threshold.

Details of Fabian and Marianne’s income/receipts/benefits and expenses/contributions for the 2024 year
of assessment are as follows:
Notes R

Income/receipts/benefits
Salary and bonus 1 400 000
Bursary 1 ?
Reimbursement of travel expenses (section reference to be provided) 2 ?
Subsidy in respect of home loan (par. reference to be provided) 3 ?
Bakery business taxable income 4 1 200 000
Rental of flat 5 ?
Foreign dividend (section reference to be provided for exemption, if applicable)
(not from a tax-free investment or collective investment scheme) 6 3 000

Expenses/contributions
Medical expenditure 7 ?
Current contributions to a retirement fund 8 ?

Notes:

1. Bursary

BB provided Fabian’s son-in-law, James, with a bursary of R30 000, based on merit, to study towards
a honours degree (NQF level 8) at a recognised educational institution, on condition that the bursary
must be repaid if non-compliance occurs. James earned a total remuneration package of R560 000
for the 2024 tax year.

2. Reimbursement of travel expenses

BB reimburses Fabian R8.44 per kilometre when he uses his own motor vehicle for business
travelling. His motor vehicle cost R350 000 (including VAT) on 1 March 2022, when he purchased
it. The motor vehicle’s total running expenses for the year amounted to R36 000. Fabian kept an
accurate logbook for his business travelling, which amounted to 6 000 km out of a total of 18 000 km
travelled for the year (section reference to be provided).

3. Subsidy in respect of home loan

BB paid the Housing Bank on behalf of Fabian during the year, thereby assisting Fabian paying for
his home loan with Housing Bank. Because of BB’s payments to the Housing Bank, it charges
Fabian a reduced rate of 11% per annum on his home loan of R700 000, instead of its normal home
loan rate of 13% per annum.

Assume the REPO rate (repurchase rate) was 9% per annum throughout the year of assessment
(par. reference to be provided).
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Test 3 July 2024

QUESTION 1 (continued)

4. Bakery business taxable income

Marianne owns a bakery in her own name which earned a taxable income of R1 200 000 for the year
of assessment.

5. Rental of flat

Fabian rented his 2-bedroom flat to Shamsi and James for the year for R6 000. All the parties agreed
that instead of Fabian charging a higher rental, Shamsi and James will also pay most of the expenses
related to the flat (except where indicated otherwise), even though it is invoiced in Fabian’s name.

The costs that Shamsi and James incurred for the year were as follows: R
Rates and taxes 8 000
Levies 10 000
Replacement of old stove 7 000
Electricity (in Shamsi and James’ name) 14 400
Fitment of awning (roof) to cover veranda (paid by Fabian) 15 000

6. Foreign dividend

Fabian received a foreign dividend from a company listed on the JSE Limited (section reference to
be provided for exemption, if applicable).

7. Medical expenditure

Fabian is a member of a medical aid fund and Marianne, and Douglas are registered as dependants.
No member of the family has a disability as defined in section 6B. Fabian’s portion of forty percent
(40%) of the total medical aid contributions amounted to R72 000 for the year of assessment. BB
paid the balance of sixty percent (60%) on his behalf.

8. Current retirement fund contributions

BB and Fabian each made provident fund contributions of R65 000 during the year of assessment.
Fabian also made a once off contribution of R162 000 towards a retirement annuity fund. 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. Fabian had a balance of disallowed retirement
fund contributions of R80 000 on 28 February 2023.

REQUIRED: MARKS

Calculate Fabian Julies’ normal income tax payable after rebates and tax credits for the
year of assessment ended 29 February 2024. Provide reasons and substantiate in terms
of the Income Tax Act, where an amount is excluded from taxable income, or not subject
40
to tax, or not allowable as a deduction, with reference to all the information provided.

Note:
• Support the transactions with references to the relevant sections/paragraphs of the
Income Tax Act No. 58 of 1962, only as indicated in the question.
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Test 3 July 2024

QUESTION 2 (20 marks, 36 minutes)

A colleague of Fabian, named Damion, approached him regarding the calculation of the taxable benefit
for receiving the use of an employer-owned vehicle, for 7 months during the 2024 year of assessment.

Damion provided Fabian with the following information and the calculation was done by himself:

The employer granted the use of its motor vehicle to Damion from 1 August 2023 to 29 February 2024.
The motor vehicle cost the employer R250 000 excluding VAT) on 1 March 2021 and was not subject to a
maintenance plan. Damion kept an accurate logbook for the period, which indicated he travelled a total of
15 000km, of which 3 000km was for private purposes. Damion also incurred the following expenses
during the period of use: all the fuel expenses of R29 000; repairs of R8 000, caused when Damion
reversed the motor vehicle into a pole.

The line items of the calculation Damion did, is as follows:

1. Determined value of vehicle – R250 000 x 85% x 85% x 85% = R153 531
2. Value of benefit before reductions – R153 531 x 3.25% x 12/7 = 8 554
3. Less: Business kilometres travelled (3 000km/15 000km x R8 554) = (1 711)
4. Value of benefit for business purposes 6 843
5. Less: expenses incurred by Damion for business purposes
6. Maintenance – R8 000 x (3 000km/15 000km) (1 600)
7. Fuel – R29 000 x 7/12 (16 917)
8. Allowable tax deduction for travel expenses incurred (11 674)

REQUIRED: MARKS

Fabian and Damion have approached you, as a tax practitioner, to advise them on the
correctness of Damion’s calculation regarding the use of the employer’s motor vehicle,
considering the information provided by Damion.

Address a memo to Damion, for each line item in the calculation, indicating whether
it is correct or not, with a reason. If applicable, briefly only discuss the correct procedure
that should have been followed in the calculation of the line item, together with the correct
monetary item and/or figure/amount for line items, when applicable. Do not redo the 18
complete calculations, marks could be forfeited/lost by doing so.
2
Format and layout, 1 mark each.

Your answer should be in the following format:

Line item 1 – determined value

Indication – correct / incorrect

Reason/s for incorrect items in line item, e.g. correct/incorrect amount, calculation

Brief discussion of the correct procedure together with the correct monetary item and/or
figure/amount

Line item 2 – value of benefit before reductions etc.

©
Unisa 2024
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Test 3 July 2024

SCHEDULES

A. 2024 – TAX TABLES

(i) Persons (other than companies and trusts)

Taxable income Rates of tax

Where the taxable income does not exceed R237 100 18% of each R1 of the taxable income;

exceeds R237 100 but does not exceed R370 500 R42 678 plus 26% of the amount by which
the taxable income exceeds R237 100;

exceeds R370 500 but does not exceed R512 800 R77 362 plus 31% of the amount by which
the taxable income exceeds R370 500;

exceeds R512 800 but does not exceed R673 000 R121 475 plus 36% of the amount by which
the taxable income exceeds R512 800;

exceeds R673 000 but does not exceed R857 900 R179 147 plus 39% of the amount by which
the taxable income exceeds R673 000;

exceeds R857 900 but does not exceed R1 817 000 R251 258 plus 41% of the amount by which
the taxable income exceeds R857 900;

exceed R1 817 000 R644 489 plus 45% of the amount by which
the taxable income exceeds R1 817 000.

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 R100 000 ............................................ 33 760 141.5 43.8

exceeds R 100 000 but does not exceed R200 000 ....... 60 329 158.0 54.8
exceeds R200 000 but does not exceed R300 000 ........ 86 958 171.7 60.4
exceeds R300 000 but does not exceed R400 000 ........ 110 554 184.6 65.9
exceeds R400 000 but does not exceed R500 000 ........ 134 150 197.6 77.5
exceeds R500 000 but does not exceed R600 000 ........ 158 856 226.6 91.0
exceeds R600 000 but does not exceed R700 000……. 183 611 230.5 102.1
exceeds R700 000 but does not exceed R800 000 ........ 209 685 234.3 113.1
exceeds R800 000......................................................... 209 685 234.3 113.1

(ii) Prescribed rate of reimbursive travel expenses – R4.64 per kilometre

 ii TAX3761
Test 3 July 2024

(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 R161 per day.

Daily allowance for food and incidental cost is R522 per day.

C. REBATES

Persons under 65 ..................................................................................................................... R17 235

Persons 65 and under 75 (R17 235 + R9 444)...................................................................... R26 679

Persons 75 and over (R17 235 + R9 444 + R3 145) .............................................................. R29 824

D. MEDICAL AID TAX CREDITS

Main member R364

Main member with one dependant (R364 + R364) R728

Main member with two dependants (R364 + R364 + R246) R974

Each additional dependent qualifies for a further rebate or credit of R246.

 iii TAX3761
Test 3 July 2024

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 business” 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) R800 000
Ceiling on debt relating to vehicle cost Section 8(1)(b)(iiiA)(bb)(B) R800 000
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Test 3 July 2024

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 R95 750
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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