INDIVIDUALS

Index of questions:

Number Name Batch Principle Marks

1 Graeme Francolin Various (incl purchased annuity, 11F
2 Jane 11F, donations, rebates
3 Mr Dachsund 11F, capital gain, donations, rebates
4 Henry Cravitz Right of use, 11F, allowances, rebates 23
5 Felicia Naidoo Right of use, 11F, CGT, rebates 30

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© 2023 University of Pretoria
QUESTION 1

The following particulars relate to Graeme Francolin for the 2023 year of assessment.
Graeme is married in community of property.

He retired from his position as managing director of Swainsons Ltd on 31 March 2020, the
day before his sixty-fifth birthday. He has been semi-retired since this date. He still acts as a
consultant for his former employer. As he is a colonel in the army, he spends a lot of time
“working” for his regiment.

His receipts and accruals for the 2023 year of assessment were as follows:
Consultancy fee from Swainsons Ltd R129 000

An amount of R3 000 a month was received throughout the 2023 year of assessment from an
insurer. He had purchased this annuity, which is for a period of ten years, in 2016 for
R225 000. Assume the capital element of this annuity amounts to R22 500.

An amount of R75 000 was paid to him on 31 March 2022 by Swainsons Ltd in terms of an
agreement whereby Graeme agreed not to render his specialised services to any other
person for a ten-year period.

Graeme has a number of investments. The following amounts accrued to him from these
investments during the 2023 year of assessment:

Interest on fixed deposit that forms part of the joint estate R53 200
Net rentals from a flat bequeathed to him by his late father
(Asset AND income excluded from the joint estate) R33 400
Annuity from a family trust (funded by property rentals)
(Asset and income excluded from joint estate)
R 5 400

His expenditure for the year was as follows:

Legal expenses of R6 000 relating to the transfer of the flat into his own name.

Repairs to the flat. The wood balcony had completely deteriorated and this was replaced with
a brick balcony as Graeme believed it would last longer. These repairs cost R12 400.

Current contributions to a retirement annuity fund paid by Graeme amounted to R44 500.

REQUIRED:

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Determine Graeme’s 2023 taxable income.

QUESTION 2

Jane is 38 years old and a single parent of a 10-year-old daughter. The following information
relates to the 2023 year of assessment:

Salary 190 000

Bonus 19 000
Dividends received (note 1) 57 513
Interest received (note 2) 11 700

Pension fund contribution 15 200

Donations (note 3) 4 300
Medical expenses (note 4) 65 000
Retirement annuity fund contributions 13 500
(current period) (note 5)

In the previous year of assessment, Jane donated a block of flats to her 10-year old
daughter, Annie. During the current year of assessment, Annie received rental income
amounting to R230 000 from letting the block of flats.

Notes

1. Dividends received
• R8 500 from a South African company
• R49 013 from a foreign company (ABC Plc, in which Jane holds 15% of the equity
shares of the company; The company is not dual listed)

2. Interest received
• R5 800 from a foreign savings account
• R5 900 from a South African savings account

3. Jane made the following donations during the year:

• Public Benefit Organisation 1 000
• University of Pretoria (PBO) 1 800
• Non-Public Benefit Organisation 1 500

4. Jane has had a hearing problem since birth (she cannot use her hearing as a primary
means of communication). During the year of assessment she bought herself a new
hearing aid, costing R25 000. She could only claim 80% of this expense from her medical
aid fund. Her medical aid fund contributions for the year of assessment amounted to
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© 2023 University of Pretoria
 R40 000 in respect of herself and her daughter. Her employer paid no portion of the
contributions.

5. Retirement annuity fund contributions amounting to R1 500 were not allowed as

deductions for current contributions during the previous year of assessment (this is not
included in the current year's amount). Her employer paid no portion of the contributions.

REQUIRED:

Calculate Jane’s Normal tax Liability for her 2023 year of assessment.

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© 2023 University of Pretoria
QUESTION 3

Mr Daschund is 66 years old and is ordinarily resident in South Africa. Mr Daschund was
married out of community of property. His wife died on 28 February 2023.

Mr and Mrs Daschund have two dependent children, Bernard and Steffie, aged twenty and
seventeen respectively.

Mr Daschund is employed as an agent with Dogs Limited. Mr Daschund also carries on a

small business from his home, developing and selling dog tags.

Mr Daschund’s receipts and accruals during the 2023 year of assessment were as follows:

Note Rand
Basic salary from Dogs Limited 199 000
Commission from Dogs Limited 350 000
Entertainment allowance 1 11 000
Interest received from:
 Bank account in Britain – the equivalent of 1 750
 Nedbank cheque account 15 200
Dividends from:
 SA companies – local dividends 350
 Taxable foreign dividends 3 000
Fees from his business at home 2 373 000

Notes:

1. Mr Daschund incurred non-capital entertainment expenses amounting to R4 750.

2. Mr Daschund has incurred the following expenses in respect of his business at home:

Note Rand
Interest paid on his bond 2.1 3 250
Capital paid on his bond 2.1 2 750
Property rates and taxes 2.1 720
Water and electricity 2.1 2 400
Bad debt written off 2.2 3 500

2.1 These costs represent the portion of his household expenses incurred during the 2023
year of assessment, relating to his trade (dog tag business). His study is specifically

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 equipped for this trade and regularly and exclusively used for the purpose of that
trade (already apportioned).

2.2 The bad debt written off relates to an amount owed to him by a client in respect of a
sale to the client during the 2019 year of assessment.

3. Mr Daschund is a member of the Dogs Limited Pension Fund, to which he contributes

R1 650 per month. Dogs Limited calculates Mr Daschund’s contribution as a
percentage of his basic salary and his entertainment allowance.

4. Mr Daschund is a member of a retirement annuity fund. On

1 February 2023 he made an annual contribution of R30 500 to the retirement annuity
fund. In the 2022 year of assessment R3 000 was not allowed as a deduction.

5. Due to his wife’s illness, his medical expenses for the year were very high. He made
medical aid fund contributions of R52 500 in respect of his family to the Healthmed
Medical Aid (in respect of himself, his wife and two children). He also paid doctor’s
fees totalling R25 000 in respect of his wife’s illness before she died (the R25 000 is
made up of qualifying medical expenses not paid by the medical aid fund).

6. Mr Daschund made a qualifying donation of R15 000 to a Public Benefit Organisation,

from whom he received the required certificate in order to claim the donation for tax
purposes.

7. On 20 February 2023 Mr Daschund sold all his shares in Epol Limited for R78 000.
He originally bought these shares as an investment on
30 November 2018 for R22 500. He had to sell the shares in order to pay for his wife’s
funeral. This was the only asset sold by Mr Daschund during the year of assessment.

8. Dogs Limited deducted R146 800 in respect of employee’s tax from his salary for the
2023 year of assessment.

9. Mr Daschund has paid provisional tax of R22 300 for the 2023 year of assessment.

REQUIRED:

Calculate the normal tax due by or to Mr Daschund for his 2023 year of assessment. Show all
your calculations.

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© 2023 University of Pretoria
QUESTION 4 (based on a past CEV 4) (25 marks; 37.5 minutes)

(This question includes transactions relating to allowances, fringe benefits and CGT)

Henry Cravitz is a 36-year-old businessman employed by High Performance Auditors Limited

(HPA) in Pretoria. He has been working for HPA for the past four (4) years. Henry and his
wife, Liza Cravitz (married in community of property) found out in the early years of their
marriage that they will never be able to have children of their own. Due to this, they decided to
adopt two children. Peter was officially adopted in 2017 when he was 2 years old and Eva (1
year old) was officially adopted on 1 August 2022. Henry and his family live in Woodhill Estate
in Pretoria.

The following information relates to Henry’s 2023 year of assessment:

1. Henry receives an annual salary of R540 000 from HPA. During February of the 2023 year
of assessment he also received an additional performance bonus of R40 000.

2. Due to the fact that Henry must travel extensively for business purposes, HPA decided to
give him the right of use of a Porsché Cayenne from 1 October 2020. HPA purchased the
Porsché on 1 April 2019 for an amount of R1 445 000 (VAT included). He also receives a
monthly travel allowance of R4 500 with regards to the Porsché. During the 2023 year of
assessment, Henry travelled 22 444km with the Porsché of which 16 833km was for
business purposes. Henry is responsible for all the fuel costs which amounted to R32 943
during the 2023 year of assessment. Other actual expenditure incurred with respect to the
Porsché is as follows:

Expense Cost paid by R

Maintenance Henry 17 500
Licence HPA 1 200
Insurance HPA 14 400
Total 33 100

3. HPA expects of Henry to visit clients which are far from his home. In order to cover his
meals and incidental costs while he’s away on business, Henry receives a subsistence
allowance of R1 900 per month. Henry spent 55 days away from home during the 2023
year of assessment. He incurred actual expenditure of R14 500 in total (which he has all
the necessary proof of) during these 55 days. HPA also paid for Liza to visit Henry in Cape
Town for three (3) days during the 2022 year of assessment. Her return flight cost R8 940
and was paid in full by HPA.

4. HPA also gave Henry the right of use of an Asus laptop on 15 June 2021 when the market
value of this asset was R15 000. The laptop was purchased by HPA on 1 March 2021 for
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 R16 000. The right of use of the laptop was given to Henry for five (5) years. Private use of
the laptop is only incidental. The determined useful life of the laptop is four (4) years.

5. Henry belongs to HPA’s pension fund and contributes R2 700 of his normal salary per
month to this pension fund. According to HPA’s policy, HPA is required to contribute an
additional 2% of every employee’s salary to the pension fund every year.

6. Henry also belongs to a retirement annuity fund. During the 2023 year of assessment, he
contributed R4 000 per month to this fund. HPA pays an additional R500 a month to this
fund on behalf of Henry. An amount of R12 500 was not deductible in the 2022 year of
assessment with regards to his retirement annuity fund contributions.

7. Henry and his family belong to the MPS medical aid scheme. His contribution for the
period of 1 March 2022 to 31 July 2022 was R5 500 per month. From 1 August 2022, he
had to pay an additional R900 to the fund every month since Eva was also registered as a
dependant of Henry’s medical aid from this date. Liza and Henry did everything in their
power during the current year of assessment to conceive a child of their own through in
vitro fertilisation (IVF). The procedure was conducted by a qualified fertility doctor for a
total amount of R150 000 of which the medical aid only paid R100 000. It was
unfortunately not a successful procedure.

REQUIRED:

a) Calculate Henry Cravitz’s normal tax liability for the 2023 year of assessment. Provide
reasons for nil effects and show all calculations and considerations. Round all amounts to
the nearest rand. Assume that Henry Cravitz will choose the tax option which is most
beneficial to him. (25)

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© 2023 University of Pretoria
QUESTION 5 (based on a past YEAR TEST 3) (30 marks, 45 minutes)

(This question includes transactions relating to allowances, fringe benefits, capital

allowances, CGT and interest)

Felicia Naidoo is a 48-year-old South African resident. She has been working for SeaFish Ltd for
five years as the company’s marketing director. Felicia is married out of community of property
to Stewart Naidoo (55 years old). They have two children, Jade (16 years old) and Luke (23
years old). Felicia resigned from SeaFish Ltd effective 30 September 2022 to start her own
business. Her last day at work was 30 September 2022.

The following information applies to Felicia’s 2023 year of assessment:

1. She earned a monthly gross salary of R57 500 (excluding any fringe benefits) till she
resigned.

2. Since 1 March 2020 she has been enjoying the right to use a company Audi A3 (passenger
vehicle). SeaFish Ltd purchased this car on 1 February 2019 at a cost of R350 000
(excluding VAT and finance charges) under a maintenance plan. Felicia kept a logbook
(acceptable to SARS) of distances travelled during the 2023 year of assessment. She
travelled 16 220 km in total from 1 March 2022 till the date of her resignation, of which
10 950 km were for business purposes. Felicia paid for the licence, maintenance and fuel of
the car which amounted to R1 000, R5 000 and R25 000 respectively during the period
1 March 2022 till the date of her resignation. The R5 000 maintenance cost incurred by
Felicia was for electronic repairs to the vehicle, which were not covered by the maintenance
plan.

3. She received foreign dividends of R22 000 (she holds 12% of the equity shares in this
foreign company). She also received local interest of R12 200.

4. During the entire 2023 year of assessment, she contributed R4 500 per month to a
retirement annuity fund. She did not belong to any pension or provident fund while she was
employed by Seafish Ltd. As a part of her employment conditions, SeaFish Ltd paid R2 500
per month into this retirement annuity fund on Felicia’s behalf (not included in the R4 500
above) till the date of her resignation. Till the end of the 2022 year of assessment all of her
contributions to this fund have always been deductible for normal tax purposes. For the
purposes of calculating the section 11F deduction, you may assume that “remuneration” as
defined in the Fourth Schedule amounts to R481 725.

5. On 1 October 2022 she purchased a yacht (12.1 metres in length) in order to start her new
business, which involved taking groups of clients on sunset cruises at sea. The cost of the
yacht was R1 650 000 (excluding VAT and finance charges) and it was brought into use
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 immediately in the cruise trade. Felicia is not a VAT vendor. She purchased the yacht in
terms of an instalment sale agreement with her bank. The agreement stipulates that Felicia
must make re-payments every 6 months, with the first repayment being made on
31 March 2023. The yield to maturity which is applicable to the finance charges on the
agreement is 15.21233% per accrual period.

Felicia’s income from sunset cruises amounted to R350 000 till the end of February 2023. Tax
deductible expenditure (excluding finance charges) incurred in respect of this trade for the same
period amounted to R54 000. Felicia was not satisfied with the financial performance of her
business and decided to sell the yacht on 28 February 2023 to a local businessman for
R1 750 000. She did not sell any other capital assets during the year of assessment. She settled
the outstanding amount owing to the bank in respect of the instalment sale agreement on
1 March 2023.

The write-off period for this type of yacht in terms of Interpretation Note 47 is 12 years. The yacht
was only used for business purposes throughout.

6. Felicia is a dependant on her husband’s medical aid. The medical aid contributions
amounted to R4 000 a month and are paid in full by Stewart. Felicia, however, paid for the
following qualifying medical expenses out of her own pocket as they were not covered by the
medical aid:
• Optometry expenses for herself (eye tests and contact lenses) R3 600
• “Tummy tuck” cosmetic surgery for herself R75 000
• Visits to the doctor for Jade R2 600

REQUIRED:

Calculate Felicia’s total normal tax liability for her 2023 year of assessment.
Use the framework applicable to individuals. Round all amounts off to the nearest Rand. (30)

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