1 / 21

Individuals

Individuals. EXPECTED OUTCOMES Calculate Normal tax Liability – using the framework Apply provisions of the Act iro Married persons and minor children Apply act –calculation of backdated salaries

rollin
Download Presentation

Individuals

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Individuals • EXPECTED OUTCOMES • Calculate Normal tax Liability – using the framework • Apply provisions of the Act iro Married persons and minor children • Apply act –calculation of backdated salaries • Calculate deductions of a private nature which can be claimed by individuals in respect of contributions to pension and RAF as well as medical cost. • Do integrated case study.

  2. Individuals • Some Relevant Issues • Tax calculation • - Tax tables & Rebates • Interest & Dividend exemption • Special deductions • - Pension fund contributions : s11(k) • - RAF contributions : s11(n) • - Medical expenses : s18 • - Donations : s18A • Antedated salary & pension • Tax collection • Rating formula – s5(10) • Anti-avoidance • - Diversion of income

  3. Normal Tax Framework • Gross Income (s1) • Minus : Exemptions (Ch II, pt I, s10) • Equals : Income • Minus : Deductions (Ch II, pt I • s11 - s23 mainly) • Plus : Taxable Capital Gains (s26A) • Equals : Taxable income/Assessed Loss • Individuals • Taxable Income x Tax rates s5 • Minus : Rebates (s6) • = Normal Tax liability

  4. Tax Rates • s5 – Different rates for : • - individuals, • - companies, • - trusts, • - gold mines, • - foreign companies, • - small business corporations, • - s5(10) • - etc. • Individuals • - Tables published in Govt. Gazette • - Sliding scale • - See Appendix A, p921 & • Appendix F [Quick Reference Table], p924

  5. IndividualsNormal Tax Rebates • Available to individuals only & certain trusts (special trusts) • Apportioned for partial years of assessment • - Year in which born (if liable) • - Year in which taxpayer dies • - Year in which taxpayer goes insolvent • Two Normal Tax Rebates (s6) • - Primary rebate – all natural persons R8,280 (2009) [R7,740 (2008)] • - Secondary rebate – 65 years or older R5,040 (2009) [R4,680 (2008)] • * i.e. R13,320 in total [R12,240 (2008)] • * age taken on last day of tax year • To be distinguished from the ‘Foreign Tax Rebate’ (s6quat) • - Not covered this year

  6. IndividualsDividend Exemption • S10(1)(k) Exemption • - Available to all taxpayers • Most local (SA) dividends exempt under s10(1)(k)(i) – Chap 4, Pg 78 • - Certain unit trust (CIS) dividends not exempt • - Share buy-back dividends not exempt for share-dealers • Certain foreign dividends exempt under s10(1)(k)(ii) - Chap 4, Pg 78 • - s9D • - Not covered in detail this year • - See Chapter 16

  7. IndividualsGeneral Exemption for Interest & Dividends • S10(1)(i)(xv) Exemption • - Under 65 : R19,000 • - 65 & older : R27,500 • (aa) First R3,200 for foreign dividends and foreign interest • - Foreign dividends first • (if not already exempt under s9D or s10(1)(k)(ii)) • - Bal. (of R3,200) for foreign interest • (bb) Balance after (aa) for local interest • Balance for local dividends • - if not already exempt under s10(1)(k)(i)

  8. Pension Fund Contribution-Chp 6.12 • S11(k) : Deduction available to : • - employee, • - holder of office, or • - partner (who was an employee before becoming a partner) • Deduction for ‘current’ contributions made • - limited to the greater of • * R1, 750 or • * 7.5% of remuneration from ‘retirement-funding employment’ • - Excess not carried forward • Arrear contributions • - limited to R1,800 p.a. • - Excess carried forward to next year (subject to same limit)

  9. Pension Fund ContributionsRFE Income • Retirement-funding employment Income (RFE Income) • Separate definitions in respect of : • - Employees, Holders of office (e.g. directors), & Partners in partnership • Employees & Office-bearers • That portion of remuneration taken into account in determining pension or provident fund contributions • - Does the employee / office-bearer receive remuneration? • - Is he/she a member of a pension fund or provident fund? • - How much does the fund take into account to determine contributions? • Partners in partnerships • Partnership income, but limited to salary from last year of employment • (before becoming a partner) • Example 131

  10. RAF Contributions • S11(n) : Contributions to RAFs (Retirement Annuity Funds) • Current contributions – Limited to the greater of : • - 15% of “Net” Non-RFE Income • - R3,500 minus Pension Fund deduction • - R1,750 • Disallowed excess c/f to following year • “Net” Non-RFE Income • - Non-RFE Income (not pensionable) • - then deduct all admissible expenses, including assessed losses but before deducting • * medical expenses (s18) • * donations (s18A) • * lessor’s soil erosion exp. (s17A) • * certain farming expenditure

  11. RAF ContributionsOther limits • Overall limit (current contrib.) • - Cannot create an assessed loss • - Capital gains not taken into account as non-RFE Income • (TCG included in Taxable Income) • - Excess carried forward to next year (subject to same limit) • Arrear contrib. (reinstatement) • - limited to R1,800 p.a. • - Excess carried forward to next year (subject to same limit) • Example pg 133

  12. Exercise • Mr. S, aged 27 was employed • throughout the year of • assessment and received a • salary of R 48,400 for the year • and a bonus of R5000 on his • birthday. He also received dividends • from SA companies of R 2,200 • and interest from a source • within SA of 20,300. He must • belong to the pension fund • and a contribution of 8% of his • monthly salary must be made.. • Mr. S paid arrear pension • Contributions of R 2000 during the • year. He also contributed R 3,600 to a • RAF during the year. • Calculate the taxable income of • Mr. S for the year of • assessment.

  13. Exercise • Mr. Botha is a partner in a law firm • and was a member of a pension fund • before becoming a partner. • After becoming a partner he • continued his membership of the • pension fund. His salary from the • partnership during the 12 month • period prior to becoming a partner • was R 384,000 • Calculate the maximum deductible • contribution to the pension fund if his • earnings as a partner for the year • ended 28 Feb 2009 are: • R 420,000 • R 360,000

  14. Donations made (s18A) • Donations made by any taxpayer • Deduction for donations made to • - Public Benefit Organisations (s30) • - Other entities (s10(1)(cA)(i) & (j)) • Activities listed in Part II of 9th Sch. • Approved by Minister of Finance • Deduction limited to : • - 10% of taxable income • (TI before s18 & before s18A) • 9th Sch. : Part I Vs Part II • - PI – PBOs exempt from Normal Tax under s10(1)(cN) • - PII – PBO exempt AND donations to such PBO qualify for s18A deduction (for donor) • - All PBO’s in PII also appear in PI, but not all PBO’s in PI are in PII

  15. DonationsValue of Non-cash donations • Trading stock (Financial instruments, i.e. shares, debentures, etc.) • - Lower of : • * Fair Market Value (FMV) ito s22(8); or • * s11(a) cost or opening stock value • Trading stock (Other) • - s11(a) cost or opening stock value • Other trading assets (Not stock) • - Lower of FMW or Tax Value • Other assets (non-trading) • - Lower of FMV or Cost • (For movable assets, ‘cost’ may be depreciated @ 20%p.a. RB) • Assets specifically purchased or manufactured (etc.) for donation • -Lower of FMV or Cost - Ex. Pg 203

  16. Medical Expenses (s18) - 1 • Medical expenses in respect of • - self, spouse and dependents • What kinds of expenses qualify? • - Medical aid contributions in SA ito M/Aid Scheme Act or similar in other countries • - Unrecovered (from med aid) costs • * doctors, dentists, optometrists, etc • * hospitals, nursing homes, etc. • * prescription medicines (pharmacies) • * necessary expenditure related to disability • * where amt included in employee’s income as a fringe benefit such amt.

  17. Medical Expenses (s18) - 2 • Deductible amount • - 65 or over : all expenses (no limit) • - under 65, with handicapped family member :01 March 2006 no limit , I.e. all expenses • - under 65 (no disability) : • subject to a threshold • - Total of all medical expenses • MINUS • 7.5% of TI (TI before s18, after s18A) • - Net medical aid contributions subject to • - R570 per month for taxpayer & R570 for one dependent (R1 140) • - R345 thereafter for each additional dependent • - Balance of medical aid +qualifying medical expenditure exceeding 7.5% of TI before this deduction

  18. Medical expensesWho is a ‘child’?(or step-child) • Under 18; or • 18 to 20 but • - unmarried; • - wholly/partially dependent upon taxpayer for maintenance; and • - not liable for normal tax • 21 to 25 but • - full time student; • - unmarried; • - dependent upon taxpayer; and • - not liable for normal tax • Any age but • - mentally/physically incapacitated; • - dependent upon taxpayer; and • - not liable for normal tax;

  19. Medical expensesAdditional points • Person who pays the expense claims the deduction • No deduction allowed for amounts recoverable from a medical aid or insurance • Handicapped person applies even if no expenditure incurred on handicapped person • NB: Definition of a Handicapped person will be deleted from 1 March 2009 • Only expenses actually paid may be claimed – no deduction if incurred but not paid • Examples page 214 - 216

  20. Medical expenses • Miss G is an employee aged 44. Her only source of income is her salary, which amounted to R 136,000 for the current year of assessment. During the year she paid qualifying medical expenses of R 8,080 and medical aid fund contributions of R 7,200. Her employer contributed • R 9,240 to the medical aid fund on her behalf. Calculate the taxable income of Miss G for the year of assessment.

  21. Medical expenses • Salary 136, 000 • Add Fringe Benefit 2,040 • 138,040 • Less Medical Expenses (1) 0.00 • Less : Medical expenses(2) ( 7,300) • Taxable Income 130,740 • NB: The fringe benefit to any employee is the amount by which the contributions paid by the employer exceeds the limits for the medical contributions

More Related