Description
South african tutors who are experienced in taxation will be preferred
Unformatted Attachment Preview
23
2023
MODULE NAME:
MODULE CODE:
TAXATION
TAXN7321
ASSESSMENT TYPE: ASSIGNMENT 1 (PAPER ONLY)
TOTAL MARK ALLOCATION: 100 MARKS
TOTAL HOURS: 10 HOURS
By submitting this assignment, you acknowledge that you have read and understood all the rules
as per the terms in the registration contract, in particular the assignment and assessment rules in
The IIE Assessment Strategy and Policy (IIE009), the intellectual integrity and plagiarism rules in
the Intellectual Integrity and Property Rights Policy (IIE023), as well as any rules and regulations
published in the student portal.
INSTRUCTIONS:
1.
No material may be copied from original sources, even if referenced correctly, unless it is a
direct quote indicated with quotation marks. No more than 10% of the assignment may
consist of direct quotes.
2.
Your assignment must be submitted through SafeAssign.
3.
Save a copy of your assignment before submitting it.
4.
Assignments must be typed unless otherwise specified.
5.
All work must be adequately and correctly referenced.
6.
This is an individual assignment.
7.
Show all calculations, where applicable (marks may be awarded for this).
© The Independent Institute of Education (Pty) Ltd 2023
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Referencing Rubric
Providing evidence based on valid and referenced academic sources
is a fundamental educational principle and the cornerstone of highquality academic work. Hence, The IIE considers it essential to
develop the referencing skills of our students in our commitment to
achieve high academic standards. Part of achieving these high
standards is referencing in a way that is consistent, technically
correct and congruent. This is not plagiarism, which is handled
differently.
Poor quality formatting in your referencing will result in a penalty of
according to the following guidelines a maximum of ten percent
being deducted from the overall percentage. Please note, however,
that evidence of plagiarism in the form of copied or uncited work
(not referenced), absent reference lists, or exceptionally poor
referencing, may result in action being taken in accordance with
The IIE’s Intellectual Integrity Policy (0023).
Required:
Technically correct referencing
style
Consistency
• The same referencing format
has been used for all in-text
references and in the
bibliography/reference list.
Technical correctness
• Referencing format is
technically correct throughout
the submission.
• The correct referencing format
for the discipline has been
used, i.e., either APA, OR
Harvard OR Law
• Position of the reference: a
reference is directly associated
with every concept or idea.
• For example, quotation marks,
page numbers, years, etc. are
applied correctly, sources in
the bibliography/reference list
are correctly presented.
Congruence between in-text
referencing and bibliography/
reference list
• All sources are accurately
reflected and are all accurately
included in the bibliography/
reference list.
In summary: the recording of
references is accurate and
complete.
Markers are required to provide feedback to students by indicating
(circling/underlining) the information that best describes the
student’s work.
Minor technical referencing errors: 5% deduction from the
overall percentage. – the student’s work contains five or more
errors listed in the minor errors column in the table below.
Major technical referencing errors: 10% deduction from the
overall percentage. – the student’s work contains five or more
errors listed in the major errors column in the table below.
If both minor and major errors are indicated, then 10% only (and
not 5% or 15%) is deducted from the overall percentage. The
examples provided below are not exhaustive but are provided to
illustrate the error.
Minor errors in technical correctness of
referencing style
Deduct 5% from overall percentage.
Example: if the response receives 70%,
deduct 5%. The final mark is 65%.
Minor inconsistencies.
• The referencing style is generally
consistent, but there are one or two
changes in the format of in-text
referencing and/or in the bibliography.
• For example, page numbers for direct
quotes (in-text) have been provided for
one source, but not in another instance.
Two book chapters (bibliography) have
been referenced in the bibliography in
two different formats.
Generally, technically correct with some
minor errors.
• The correct referencing format has been
consistently used, but there are one or
two errors.
• Concepts and ideas are typically
referenced, but a reference is missing
from one small section of the work.
• Position of the references: references are
only given at the beginning or end of
every paragraph.
• For example, the student has incorrectly
presented direct quotes (in-text) and/or
book chapters (bibliography/reference
list).
Generally, congruence between the in-text
referencing and the bibliography/
reference list with one or two errors.
• There is largely a match between the
sources presented in-text and the
bibliography.
• For example, a source appears in the text,
but not in the bibliography/ reference list
or vice versa.
In summary, at least 80% of the sources are
correctly reflected and included in a
reference list.
Major errors in technical correctness of
referencing style
Deduct 10% from the overall percentage.
Example: if the response receives 70%, deduct
10%. The final mark is 60%.
Major inconsistencies.
• Poor and inconsistent referencing style used intext and/or in the bibliography/ reference list.
• Multiple formats for the same type of
referencing have been used.
• For example, the format for direct quotes (intext) and/or book chapters (bibliography/
reference list) is different across multiple
instances.
Technically incorrect.
• The referencing format is incorrect.
• Concepts and ideas are typically referenced,
but a reference is missing from small sections
of the work.
• Position of the references: references are only
given at the beginning or end of large sections
of work.
• For example, incorrect author information is
provided, no year of publication is provided,
quotation marks and/or page numbers for
direct quotes missing, page numbers are
provided for paraphrased material, the
incorrect punctuation is used (in-text); the
bibliography/reference list is not in
alphabetical order, the incorrect format for a
book chapter/journal article is used,
information is missing e.g. no place of
publication had been provided (bibliography);
repeated sources on the reference list.
A lack of congruence between the in-text
referencing and the bibliography.
• No relationship/several incongruencies
between the in-text referencing and the
bibliography/reference list.
• For example, sources are included in-text, but
not in the bibliography and vice versa, a link,
rather than the actual reference is provided in
the bibliography.
In summary, at least 60% of the sources are
incorrectly reflected and/or not included in
reference list.
Overall Feedback about the consistency, technical correctness and congruence between in-text referencing and bibliography:
© The Independent Institute of Education (Pty) Ltd 2023
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Question 1
(Marks: 25)
HQ Connect (Pty) Ltd (referred to hereunder as HQC), is a resident company that sells various
technological products, including smartphones and tablets. The company is a small business
corporation as defined in the Income Tax Act and its financial year ends on the last day of March.
You are provided with an extract of the statement of profit or loss and other comprehensive
income of HQ Connect (Pty) Ltd for the year of assessment ending 31 March 2024:
Note
Sales (60% cash and 40% credit)
Cost of sales
R
3 200 000
1
Gross profit
(900 000)
2 300 000
Other income
2
180 000
Compensation award
3
300 000
–
180 000
Loss of profits
120 000
– Damage to machinery
Expenditure
Bad debts
4
(62 000)
Provision for doubtful debts increase
4
(7 000)
Marketing expenses
5
(323 000)
Restraint of trade
6
(500 000)
Penalties
7
(2 300)
Trademark registration costs
8
(18 000)
Donation
9
(80 000)
Depreciation
10
(60 250)
Notes:
1. Cost of Sales
The cost of sales is made up as follows:
Opening stock (at cost price)
Add: Purchases
Less: Closing stock (at cost price)
Cost of sales
R
220 000
980 000
(300 000)
900 000
The market value of the opening stock is R200 000. The Commissioner accepts this market value as
reasonable.
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2. Other income
HQC received local dividends from a South African entity of R145 000. The company also
received local interest of R35 000.
3. Compensation award
HQC’s compensation award of R300 000 resulted from a fire at its business premises on
20 December 2023. The machinery affected by the fire incurred severe damage and was
deemed irreparable. To replace the damaged machinery, HQC purchased new machinery for
R200 000. On 29 February 2024, the new machinery was put into use for manufacturing
purposes. The tax value and book value of its damaged machinery at the date of the fire was
Rnil, having originally cost R150 000. The machinery had previously qualified for a section 12E(l)
deduction equivalent to its full cost (100%) in the year that it was brought into use.
4. Bad debts
The company does not apply IFRS 9 for financial reporting purposes. The doubtful debts have
been overdue for a period ranging from 60 days to 120 days. SARS approved an allowance for
doubtful debts in the previous year of assessment.
Year-end
Trade debtors
Bad debts
Total of doubtful
debts
2024
450 000
26 000
52 000
2023
380 000
20 000
45 500
5. Marketing Expenses
In a campaign to gain exposure and grow its sales, the company launched a campaign which
was approved at the shareholders’ meeting. A billboard was erected on the busy highway at a
cost of R300 000. The company also rented a billboard that is to be used in the outlying areas of
KZN. The rental costs amounted to R23 000 in the current year of assessment.
6. Restraint of trade
On 25 March 2024, HQC made a restraint of trade payment of R500 000 to Mr Engelbrecht, one
of their lead engineers. This payment was made to restrict Mr Engelbrecht from competing
with the company for a period of two years starting from the date of the payment. However,
only R450 000 out of the total payment will be considered as income in the hands of
Mr Engelbrecht.
© The Independent Institute of Education (Pty) Ltd 2023
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7. Penalties
HQC incurred a late payment penalty of R2 300 from the South African Revenue Service for
paying their January 2024 PAYE after the due date.
8. Trademarks
A trademark was purchased for use over a four-year period for R220 000 during the 2020 year
of assessment. The registration of this trademark was renewed on 1 January 2024 for four
years at a cost of R18 000.
9. Donations
HQC donated 5 tablets with a cost price of R16 000 each and a market value of R33 000 each,
to a local children’s organisation. The company received a valid section 18A receipt.
10. Depreciation
The depreciation relates to the following assets:
• Second-hand equipment purchased for R132 250 (including VAT) on 02 January 2024.
• Furniture for the company was purchased for a total value of R90 000 on 01 April 2022.
SARS allows the following write-off periods for purposes of section 11(e), according to
Interpretation Note No. 47:
• Furniture – 4 years
• Equipment – 5 years
Additional Information:
Assume that HQ Connect (Pty) Ltd would like to minimise its normal tax liability for the 2024 year of
assessment. The company will make any available elections in order to achieve this and will also
duly notify the Commissioner in writing of its election where applicable.
Required:
Q.1.1
Calculate the net normal tax payable by HQ Connect (Pty) Ltd for the year of
assessment ended 31 March 2024.
(25)
Show all calculations and round off all amounts to the nearest rand.
Include nil value items in your answer and provide a reason for doing so.
© The Independent Institute of Education (Pty) Ltd 2023
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Question 2
(Marks: 20)
Gerald De Beer is a 38-year-old vibrant, outgoing young man who has been employed as a digital
artist at InnovateTech Solutions (Pty) Ltd (“InnovateTech”) since 1 May 2019.
Details of Gerald’s remuneration and expenses for the year ended 29 February 2024 are as follows:
• A cash monthly salary of R80 000.
• Gerald receives a monthly travel allowance of R5 000. He drives a Toyota Corolla sedan valued
at R300 000 (including VAT). No logbook details were provided to InnovateTech as Gerald did
not maintain an accurate logbook. On average, he drives a total of 3 100 kilometres per month,
with approximately 2 200 kilometres for business purposes. No deduction will be allowed by
SARS as a result of no logbook being maintained.
•
InnovateTech provides gym membership benefits to its employees, including Gerald. As part of
their wellness program, InnovateTech covers a portion of the gym membership fees for
employees who choose to participate. Employees are responsible for a nominal monthly charge
of R100, which is deducted directly from their payslip. Gerald was a member of a nearby fitness
centre for the entire year of assessment, with a monthly membership cost of R550.
•
In addition, Gerald contributes R2 400 per month to InnovateTech’s pension fund. The
company also contributes R2 400 per month on Gerald’s behalf.
•
Gerald discovered his talent for attentive listening and effectively addressing the concerns of
his colleagues and clients. He completed a master course in life coaching in 2020. With his
newfound expertise, Gerald started his own life coaching business in the same year, offering
consultations both online and in person at a rented office in his local town.
Revenue relating to Gerald’s life coaching business amounted to R462 700 for the year ending
29 February 2024. During the year, Gerald incurred expenses directly related to his business
amounting to R136 200.
•
Gerald is a provisional taxpayer. He received his 2022 assessment with taxable income of
R1 060 000 on 01 September 2022 and the 2023 assessment was received on 1 December 2023
reflecting taxable income of R1 330 000.
•
Gerald accurately calculated and paid his first provisional tax payment at R15 459.
© The Independent Institute of Education (Pty) Ltd 2023
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Required:
Q.2.1
Calculate the monthly employees’ tax withheld by InnovateTech Solutions (Pty)
Ltd from Gerald De Beer’s remuneration.
(8)
Show all calculations and round off all amounts to the nearest rand.
Include nil value items in your answer, provide a reason for a nil value.
Q.2.2
Calculate Gerald’s second provisional tax payment for the 2024 year of
assessment, assuming that he based this payment on an estimated taxable
income of R1 200 000.
(3)
Q.2.3
Calculate if any further tax payments are required by Gerald for the 2024 year of
assessment and determine the final date of payment to avoid s89quat interest.
(7)
Q.2.4
Determine whether any penalty with regards to an underestimate may be
applied to Gerald.
(2)
Question 3
(Marks: 20)
PART A
Bob Mofokeng (55 years old) created the Mofokeng Family Trust on 15 May 2020, an inter vivos
trust to benefit his three children:
Name
Nelisiwe Mofokeng
(unmarried)
Sara Dladla (married out of
community of property)
Josh Mofokeng (unmarried)
Age
Resident
16
South Africa
32
South Africa
25
England, UK
1) During the current year of assessment, the trust owns the following assets:
–
A property complex donated to the trust by Bob Mofokeng at its market value of
R2 200 000, on the date of establishment.
–
Interest-bearing bonds issued by a local bank. These bonds were inherited by the trust
from Bob’s late mother. The market value on the date of her death was R1 000 000.
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2) The following income accrued to the trust during the 2024 year of assessment:
Net rental income
Local interest on bonds
R
192 000
128 000
320 000
3) The annual distributions approved by the trustee of the trust amounted to the following:
•
Sara received an amount of R80 000, paid pro rata out of all trust income.
•
Josh received an amount of R80 000, paid pro rata out of all trust income.
•
Nelisiwe received a R2 375 monthly annuity, paid pro rata out of all trust income.
The balance of the income was retained in the trust.
4) The trust deed stipulates that any retained rental income vests in equal shares in beneficiaries
alive at the end of each year of assessment and will be paid out to the beneficiaries in 2035.
Should a beneficiary pass away before 2035, the rental income not yet distributed will be paid
to the estate of the deceased person.
Required:
Q.3.1
Calculate the Mofokeng Family Trust’s tax liability for the year ended 29 February
2024.
(10)
Q.3.2
Calculate the taxable income of Bob Mofokeng for the 2024 year of assessment.
(5)
Assume that the taxpayers do not earn any other income apart from that
provided above.
Show all inclusions and exclusions separately with reasons.
PART B
Bob Mofokeng has approached you due to his recent diagnosis of a neurological disorder. He is
currently updating his last will and testament and intends to distribute all his assets and related
income generated, equally among his children in the event of his death.
He has heard about the potential tax benefits associated with a special trust and is interested
establishing such a trust in his last will and testament.
Required:
Q.3.3
Advise Bob on whether he may establish a special trust in terms of his will.
(3)
Q.3.4
Discuss any possible tax advantages of a special trust compared to an ordinary
trust.
(2)
© The Independent Institute of Education (Pty) Ltd 2023
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Question 4
(Marks: 15)
Liam Patel is a 58-year-old South African resident, married out of community of property to Emily.
The couple have been married for the past 20 years and live in Johannesburg. During the current
year of assessment, Liam sold or donated the following assets:
1) On 01 August 2023, Liam received distressing news from his brother, Miguel, who was facing
financial difficulties and sought Liam’s assistance. Instead of lending Miguel the money to settle
his debt, Liam donated the following to his brother, with no expectation of repayment:
•
On 10 August 2023, Liam generously donated gold coins with a market value of R300 000
and an original cost of R120 000, to his brother. Miguel had the option to either sell the
coins or use them as collateral to secure a loan. Liam paid R40 000 in donations tax by the
end of September 2023 with regards to this donation.
•
On 15 September 2023 Liam donated R200 000 in cash to his brother. Liam paid a further
R40 000 in donations tax by end of October 2023 with regards to this donation.
2) Liam purchased dividend-yielding shares on 08 November 2020 at a cost of R250 000. He
purchased them as an investment. He sold them on 31 December 2023 for R400 000.
3) Liam realised a profit of R15 000 from the sale of a Krugerrand, which he had acquired as a
hedge against inflation. He sold it because he required cash to purchase an essential asset.
4) Liam acquired the new Havel H22 vehicle for his long-weekend family trips, purchasing it for
R480 000. However, he soon discovered that the vehicle’s fuel consumption was less
economical than expected. He decided to sell the vehicle, hoping to obtain a reasonable price.
Despite his efforts, Liam faced difficulty in securing a satisfactory offer. Eventually, on
15 January 2024, he sold the asset to a general motor dealer for R300 000.
5) On 01 April 2005, Liam purchased a residence for R1 500 000. He used it solely as a primary
residence. He sold this house on 01 February 2024 for R4 800 000. Liam and Emily had decided
that it was time for them to downsize to a smaller property and purchased another unit in a
Sandton complex for R2 500 000.
© The Independent Institute of Education (Pty) Ltd 2023
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Required:
Q.4.1
Calculate the taxable capital gain to be included in Liam Patel’s taxable income
for the 2024 year of assessment. Provide reasons for any nil effects.
(15)
Question 5
(Marks: 20)
The following is an excerpt from a media release issued by the South African Revenue Services on
3 April 2023:
“The South African Revenue Service (SARS) is pleased to announce its preliminary revenue collection
results for the 2022/2023 financial year, which reflects a significant growth trajectory over the past
few years……”
“The 2023 financial year end results are an important indicator of SARS’ commitment to
implementing its legal mandate of collecting all revenue due, promoting a culture of compliance and
facilitating legitimate trade……”
“As we start the new financial year, SARS will continue to explore all avenues of revenue collection.
The ever-evolving world of work is presenting new opportunities. This changed environment was
never anticipated when we designed products to respond to the challenges in the economy.
Naturally, the enabling legislative framework will be amended to keep pace with this new
environment. We are therefore, among others, refining our tools to cater for the Gig economy and
other areas of the digital economy, including looking at the role of media influencers.”
Scenario:
Sam Brown and Jerry Black are fitness and wellness influencers with a significant online presence.
They have amassed a substantial following on TikTok, YouTube, and their personal blog, where they
share workout routines, healthy recipes, and lifestyle tips. Throughout the year they earned
commissions through affiliate marketing for fitness-related products. They collaborated with various
fitness brands for sponsored posts, featured products in their videos and blog posts.
Sam and Jerry sometimes opt for a barter arrangement, exchanging their services for high-end
fitness equipment, equivalent in value to their usual sponsored post compensation.
However, the primary source of their income comes from a single fitness company, “FitLife (Pty) Ltd,”
with whom they have an exclusive long-term sponsorship deal. More than 80% of their total
earnings for the year are derived from this contract with FitLife.
They have decided to formalise their business arrangements and establish themselves as a
professional entity. Initially they will employ a social media manager and a bookkeeper.
They are unsure of whether they should operate their business as a company or a partnership, and
they want to ensure they are compliant with all relevant tax laws and regulations.
Required:
Q.5.1
Discuss the gross income implications of the barter transactions for Sam Brown
and Jerry Black.
© The Independent Institute of Education (Pty) Ltd 2023
(4)
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Q.5.2
Discuss the possibility of Sam and Jerry’s company being a personal service
provider, with reference to the definition of a personal service provider.
(5)
Q.5.3
If Sam and Jerry’s company meets the definition of a personal service provider,
what tax obligation does FitLife (Pty) Ltd have?
(2)
Q.5.4
List two (2) measures that SARS could implement to encourage social media
influencers to accurately report their income and expenses.
(4)
Q.5.5
If Sam and Jerry registered their business as a partnership, would they qualify for
the primary tax rebate applicable to individuals? Motivate your answer.
(3)
Q.5.6
Briefly explain the purpose of the primary tax rebate.
(2)
[TOTAL MARKS: 100]
© The Independent Institute of Education (Pty) Ltd 2023
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ANNEXURE
The following tax tables are applicable for the 2024 year of assessment:
The individuals’ tax table for the tax period 01 March 2023 – 28 February 2024
Taxable income (R)
Rates of tax (R)
0 – 237 100
18% of taxable income
237 101 – 370 500
42 678 + 26% of the amount over 237 100
370 501 – 512 800
77 362 + 31% of the amount over 370 500
512 801 – 673 000
121 475 + 36% of the amount over 512 800
673 001 – 857 900
179 147 + 39% of the amount over 673 000
857 901 – 1 817 000
251 258 + 41% of the amount over 857 900
1 817 001 +
644 489 + 45% of the amount over 1 817 000
Deemed rate per kilometer schedule for the 2023/2024 year of assessment.
Fixed cost
(R p.a.)
Fuel cost
(c/km)
Maintenance
cost
(c/km)
Does not exceed R100 000
33 760
141,5
43,8
R100 001 – R200 000
60 329
158,0
54,8
R200 001 – R300 000
86 958
171,7
60,4
R300 001 – R400 000
110 554
184,6
65,9
R400 001 – R500 000
134 150
197,6
77,5
R500 001 – R600 000
158 856
226,6
91,0
R600 001 – R700 000
183 611
230,5
102,1
R700 001 – R800 000
209 685
234,3
113,1
R 800 000 and above
209 685
234,3
113,1
Value of the vehicle
(Including VAT)
© The Independent Institute of Education (Pty) Ltd 2023
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Tax Rebates
Primary (persons younger than 65)
R 17 235
Secondary (persons 65 and older)
R 9 444
Tertiary (persons 75 and older)
R 3 145
Tax thresholds applicable to individuals and special trusts
Under 65
R 95 750
65 an older
R 148 217
75 and older
R 165 689
Medical aid tax credit rates
2024
For the taxpayer
R 364
For each additional dependant
R 246
Interest exemption
2024
Person younger than 65
R 23 800
Person 65 and older
R 34 500
© The Independent Institute of Education (Pty) Ltd 2023
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