BEL 300

Question for Launch Day 2

12 February 2024

Instructions:
⮚ Answer all the questions.
⮚ Round all final amounts off to the nearest rand/percentage.
⮚ Assume that all taxpayers are South African (tax) residents, unless stated otherwise.
⮚ All amounts exclude VAT, unless stated otherwise.

2023
FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES DEPARTMENT OF TAXATION
University of Pretoria
QUESTION 1 (10 marks; 20 minutes)

Make sure that you follow the instructions on the multiple-choice mark sheet to
ensure that your answers are marked correctly. Answer this question on SIDE 1 of
the multiple-choice mark sheet. Answer the questions using a PENCIL. There is only
ONE correct option for each question. Indicate the option of your choice next to the
appropriate number on the multiple-choice mark sheet. For example: 1. A.

1. Thato is 24 years old and works at Nika Sneakers Store. On 28 February 2023, his taxable
income amounted to R91 280, while his gross income amounted to R150 000. Thato is
unsure whether he is liable for income tax.

Which one of the following statements is correct? (1)

a. Thato is not liable for income tax, as his taxable income does not exceed the tax
threshold.
b. Thato is not liable for income tax, as his gross income does not exceed the tax
threshold.
c. Thato is liable for income tax, as his taxable income exceeds the tax threshold.
d. Thato is liable for income tax as his gross income exceeds the tax threshold.
e. None of the above.

2. The court case that illustrates the meaning of “carrying on a trade” and that “trade” should
be given a wide interpretation, is: (1)

a. Commissioner SARS v Labat Africa Ltd [2011] JOL 27986 (SCA)

b. Joffe & Co (Pty) Ltd v CIR 1946 AD 157, 13 SATC 354
c. Burgess v CIR 1994 SA 161 (A), 55 SATC 185
d. BPSA (Pty) Ltd v CSARS [2007] SCA 7 (RSA)
e. None of the above

3. Morgan is a sole proprietor who owns a consulting business. On 11 November 2022, he

received a letter stating that he was being sued by Peter for an amount of R50 000. Peter
accused Morgan and his employees of incompetency due to the advice received during
one of the consultations. Morgan’s lawyer informed him that he (Morgan) would definitely
win the case. The court case was finalised on 28 February 2023 and Peter was instructed
to pay Morgan R34 000 for the damage to his reputation suffered due to the legal action
Peter instituted. Advise Morgan how much should be included in his gross income for the
2023 year of assessment in relation to the R34 000 received. (1)

a. R0
b. R34 000
c. R50 000
d. R84 000
e. None of the above

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 The following information relates to Question 4 – 5

Makhosi Lindi is a 40-year-old South African resident. He is married out of community of

property to Yivet Lindi and they have two children. They used to live in Johannesburg in a
house that Makhosi bought in 2001. Makhosi’s company promoted him to regional partner
and he had to relocate from Johannesburg to Bloemfontein to head the Free State region.
Makhosi relocated with his family on 5 May 2022.

The company paid for the following relocation expenses:

▪ Transport costs: R28 500
▪ Accommodation: R109 450 (R550 per day). Makhosi and his family stayed at a
hotel in Bloemfontein for 199 nights before they moved into their new home.

4. Advise Makhosi how much of the relocation expenses, as a benefit, will be included in his
gross income for the 2023 year of assessment. (1)

a. R0
b. R28 500
c. R100 650
d. R109 450
e. R137 950

5. Advise Makhosi how much of the accommodation benefit will be exempt from normal tax
for the 2023 year of assessment. (1)

a. R0
b. R7 150
c. R8 800
d. R100 650
e. R109 450

6. Mr van Heerden is a 35-year-old surfer. He owns a yacht which is 9 meters long. On

1 February 2023, he sold the yacht for R250 000. The yacht was originally purchased by
him on 1 July 2018 at a cost of R320 000. The yacht is not used for trade purposes nor as
a primary residence. He also had another disposal during the 2023 year of assessment
resulting in a capital gain of R60 000.

Calculate Mr van Heerden's total capital gains and losses for the 2023 year of assessment.
(1)
a. R10 000 capital gain
b. R10 000 capital loss
c. R60 000 capital gain
d. R70 000 capital gain
e. R70 000 capital loss

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7. Palesa, a 52-year-old South African resident, passed away on 3 January 2023. The
executor calculated her total capital gains and losses upon death to be R550 000.

How much is Palesa’s aggregate capital gain/loss for the 2023 year of assessment? (1)

a. R100 000
b. R204 000
c. R250 000
d. R510 000
e. None of the above

8. Mayumi Krillin Tanaka received the right of use of a BMW 1 series 118i Sports hatch from
her employer for the entire 2023 year of assessment. The determined value of the motor
vehicle on 1 March 2022 was R676 772. Mayumi kept an accurate logbook of her travels
and also all her fuel receipts. Mayumi paid for 85% of the fuel usage which amounted to
R22 500 and her employer covered the other 15%. Mayumi travelled a total of 9 000 km
during the 2023 year of assessment of which 6 000 km was for business purposes.

How much can Mayumi deduct in terms of the par 7(8) adjustment – thus, the deduction
for expenses incurred by the employee? (1)

a. R0
b. R6 540
c. R8 500
d. R10 000
e. R13 080

9. Amogetswe Joseph Magudumana is employed as a graphic designer by Peexar, an

animation studio company based in Cape Town. On 1 March 2022 and for the first time
ever, he obtained an interest-free loan of R2 250 from his employer as he needed money
to send to his mother. The money is still owing at the end of the 2023 year of assessment.
Assume an official interest rate of 9.25%.

What is the value of the taxable benefit that Amogetswe must include in his gross income?
(1)

a. R0
b. R208
c. R231
d. R2 250
e. None of the above

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10. George Jungle is employed as a full-time screenwriter by Cool-Works (Pty) Limited, a
movie production company in Johannesburg which is 100% owned by Leslie Jungle –
George’s wife. George is currently working on a movie about a notorious gang in Durban.
Cool-Works (Pty) Ltd sent George to work remotely in Durban for the period 1 December
2022 until 31 January 2023 so that he can explore the area and interview the gang’s
leaders to improve the quality of the screenplay. The company allowed George to stay for
free in a company-owned furnished apartment in Durban for these two months– all costs
included. The market related monthly rental for the apartment is R10 250. George’s
remuneration proxy is R450 000 and the apartment has 5 rooms.

What is the value of the taxable benefit that George must include in his gross income? (1)

a. R0
b. R10 250
c. R14 250
d. R20 500
e. None of the above

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QUESTION 2 (25 marks; 50 minutes)

Pinewood (Pty) Ltd (“Pinewood”) is a resident company that manufactures and sells laminated
wood which SARS approves as a process of manufacture. Pinewood’s financial year-end is
31 May. Pinewood is a registered VAT vendor. Assume all amounts exclude VAT, unless
stated otherwise.

The accountant has provisionally calculated the company’s taxable income for the year ended
31 May 2023 to be R1 050 000 BEFORE considering any of the following transactions:

1. Interest received on an investment Pinewood holds at a local bank: R80 000.

2. Pinewood owns a delivery vehicle which was purchased new on 1 May 2021 for R340 000
including VAT. The delivery vehicle was brought into use on the same day.

3. Pinewood owns a manufacturing building in Cape Town which it erected at a cost of

R2 000 000 on 1 April 2018. This factory was used by Pinewood for its manufacturing
process up until 31 May 2022 but as from 1 June 2022 Pinewood is letting the building
under a 20-year lease to Mashala (Pty) Ltd (Mashala). The building is currently used by
Mashala in its manufacturing process. In terms of the agreement, Mashala had to effect
improvements to the building to the value of R900 000. Mashala completed the
improvements on 1 August 2022 at a cost of R950 000 and brought the improvements into
use on the same day. The Commissioner of SARS calculated the present value of the
improvements discounted at 6% over the remaining lease period to be R800 000. Total
rental of R468 000 accrued to Pinewood during its 2023 year of assessment. Pinewood
currently operates from a leased factory building. The accountant correctly deducted the
rental payments.

4. Pinewood built a new administration building at a total cost of R3 250 000. The building
was completed and brought into use on 15 March 2023.

5. Pinewood produces laminated wood which is sold by various hardware stores. On

1 January 2023, a person acting as a buyer for a specific hardware store collected
laminated wood with a selling price of R120 000. A sales invoice for R120 000 was issued
with a payment due date of 28 February 2023. On 15 March 2023, Pinewood obtained
evidence that the person was not an authorised agent of the hardware store and had
disappeared with the laminated wood. Consequently, Pinewood wrote off R120 000 for
accounting purposes as bad debts on 15 May 2023.

6. Pinewood purchased a new and unused manufacturing machine for R780 000 on 1 June
2019 which was sold on 1 April 2023 for R230 000. The machine was not replaced.

7. Since 1 October 2022, Pinewood has been paying R10 500 per month to the surviving child
of a former employee, who passed away after he suffered a heart attack while at work.

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8. Total cash salaries paid by Pinewood amounted to R3 100 000. The company also
contributed 10% of cash salaries to the company’s pension fund on behalf of all employees.

9. The manufacturing plant is quite far from town and therefore, some employees live in
accommodation provided by Pinewood. Pinewood built 10 apartments which were
completed on 1 February 2022, at a cost of R325 000 per apartment. From 1 February
2022, each of these apartments were occupied by an employee who each pays a monthly
rental of R2 400. Pinewood purchased the land on which the apartments were erected in
October 2002 for R400 000.

10. A VW Polo with an original cost of R370 000 on 1 November 2022 was donated to
Pinewood on 1 April 2023 when the market value was R355 000. The VW Polo is used for
trade purposes and it was brought into use on 1 April 2023.

11. Pinewood had an assessed capital loss of R67 500.

12. The following write-off periods are allowed under Binding General Ruling No. 7:
 Delivery vehicles - 4 years
 Passenger cars - 5 years
 Machinery - 5 years

YOU ARE REQUIRED TO:

Calculate Pinewood (Pty) Ltd’s taxable income/(assessed loss) for its year of assessment
ended 31 May 2023. Show all your calculations and provide reasons for nil effects.

PLEASE NOTE: In respect of the staff accommodation referred to in note 9, also discuss the
considerations in determining the capital allowance that Pinewood (Pty) Ltd is entitled to during
its 2023 year of assessment. (25)

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QUESTION 3 (25 marks; 50 minutes)

Your friend, Mamoagi Mokajane is a 24-year-old site inspector who started a new job on
1 March 2022. Before accepting the job offer, she asked for your assistance regarding the tax
implications of certain benefits listed in the job offer.

Here is an extract from her e-mail:

Hey Friend,

I hope life has been good on your side – I am fabulous on my side! Well, except for my taxes
.

I have been employed for two years and I have just received a new job offer with a new
employer, since I am now a qualified inspector. My new salary package includes certain fringe
benefits. First of all, can you explain to me what is meant by “fringe benefit”?

I will be starting at my new employer on 1 March 2022 and will receive a monthly cash salary
of R50 000. In addition, I will also receive the following eight benefits for the period 1 March
2022 to 28 February 2023. Unfortunately, I do not fully understand the tax implications. I
would like you to calculate the amount in respect of each of these benefits to be included in
my taxable income for my 2023 year of assessment.

1. Residential accommodation
I will have the use of a flat that belongs to my employer. The flat consists of five rooms and
is furnished. I will have to pay for water and electricity. I will pay a nominal rental of R500 per
month for this accommodation.

2.Meals at the canteen

I will be provided with 300 meal vouchers a year in the cafeteria situated at the employer’s
business premises. The meals are valued at R60 per meal.

3.Holiday accommodation
During December, I will occupy the beach cottage in Camps Bay, Cape Town, for five nights.
The beach cottage belongs to my employer. During this period, the accommodation is usually
let to the public at a rate of R1 900 per night. I will pay R300 per night for the use of the
cottage.

4. Medical contributions paid by the employer

My employer will contribute R1 500 per month to my medical aid fund.

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5. Travel allowance
I will receive a monthly travel allowance of R9 000 per month. I purchased my (passenger)
vehicle on 1 January 2021 at a cost of R293 250 including VAT. Total finance costs amount to
R96 000 (R11 000 for the 2023 year of assessment). I expect that I will travel 15 400
kilometres for business purposes and a total of 18 000 kilometres for the 2023 year of
assessment.
I expect my actual costs for the 12 months to be as follows (which are fully paid for by myself):
Fuel R12 000
Insurance premiums and licence fees R4 200
Maintenance R3 450

6. Use of motor vehicle

I will also be granted the use of another motor vehicle which is owned by the employer. The
vehicle was purchased on 20 February 2022 for R385 000. This amount includes VAT and a
maintenance plan. My employer will pay for all operating expenses and I will not be using the
vehicle for business travelling. I will pay R600 monthly to my employer to receive this benefit.

7. Subsistence allowance
I will be travelling for work to a site and will spend at least one night away from my residence.
My employer will pay me a daily subsistence allowance, which is expected to add up to R3 600
in total for the 2023 year of assessment. This is meant to pay for my meals and incidental
costs, as the employer will pay for my accommodation. I expect that I will have to spend 4
nights at a hotel, while going to visit the site. Below are my expected costs, for which I will
keep documentary proof:
Meals and beverages R1 500
Laundry at the hotel R700

8. Gym membership
My employer will be paying for my gym membership at Virgin Active. The monthly membership
fee payable by my employer is R1 800, while I will only pay R300 to my employer for this benefit.

Please help me with this Friend. This makes no sense to me.

xoxo

YOU ARE REQUIRED TO:

3.1. Explain to Mamoagi what is meant by the term “fringe benefit.” (2)
3.2. Calculate the amount to be included in Mamoagi’s 2023 taxable income for each of the
benefits listed in her email, using the information provided and assuming a
“remuneration proxy” of R588 710. Provide reasons for nil effects. (23)

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QUESTION 4 (10 marks; 20 minutes)

Marietha Welthagen is a 65-year-old South African resident and an architect (sole proprietor)
by profession. She is married out of community of property to John (66 years old) and they
have a daughter, Sarah (32 years old). Marietha is a very wealthy business woman with a very
generous heart. As from 1 March 2018 up until 28 February 2022, she has made taxable
donations with an aggregate value of R26 million to friends and family. During her 2023 year
of assessment, she made the following donations:

1. A holiday house near Durban which she purchased in 2003 for R1 500 000. The house was
donated to her niece, Astrid, on 30 June 2022 when the market value was R5 250 000.
2. On 31 August 2022, Marietha handed over the plans to a life-long friend, Taylor, for a house
that she designed according to Taylor’s preferences. Although Marietha would usually
charge customers R35 000 for this type of service rendered, she gave it as a birthday gift
to Taylor.
3. While Marietha was on holiday in the Kruger National Park, she was attacked by a lion and
thought she was going to die. She told Yenna, her cousin who came to visit her on
23 November 2022, that she thinks she is not going to make it, and that if she is to pass
away because of the lion attack, Yenna must take her special leather bag worth R5 400.
Fortunately, Marietha miraculously recovered.
4. On 25 December 2022, Marietha’s Christmas gift to her husband, was that she paid for his
and her flights to the Maldives for a holiday (R13 000 per ticket) as well as the all-inclusive
hotel package (R58 000 per couple).
5. On 25 February 2023, Marietha donated a car to Tina, a friend’s daughter. The car had a
market value of R340 000 on the date of donation.
6. On 28 February 2023, Marietha treated her daughter for a mother and daughter week in
Mauritius. Marietha and Sarah each paid for their own flights to Mauritius (R8 000 per
ticket), and Marietha paid for her own all-inclusive hotel package (R30 000 per person).
Marietha also paid R30 000 cash to Sarah to pay for her own hotel package.

Additional information:
Calendars:

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YOU ARE REQUIRED TO:

a) Calculate the total donations tax payable by Marietha Welthagen during her 2023 year
of assessment. Provide reasons for nil effects. (9)
b) Using the calendars provided, advise Marietha by what date the donations tax on the
donation of the holiday house discussed in note 1, is payable. (1)

QUESTION 5 (10 marks; 20 minutes)

Michael Bester, a 69-year-old South African resident, tragically passed away in a motor car
accident on the evening of 19 August 2022. Michael was a widower at the time of his death.
His pre-deceased spouse’s whole abatement of R3 500 000 was used in the calculation of her
estate duty payable. At the time of his death, he had the following assets and liabilities.

1. Private residence in Pretoria with a market value of R2 350 000. The outstanding bond
on this residence amounted to R550 000.
2. A holiday house in Yzerfontein (South Africa), with a market value of R3 670 000 at the
time of Michael’s death. The holiday house was sold by the executor a month after
Michael’s death for R3 700 000.
3. A small house in Walvisbay, Namibia, worth R1 235 000. He inherited this house from
his grandmother, who was a Namibian citizen her whole life.
4. Shares listed on the Johannesburg Stock Exchange with a market value of R240 000.
The shares were purchased by Michael for R135 000 on 3 June 2018.
5. Cash in a South African bank account of R2 820 000.
6. Proceeds of a domestic life insurance policy amounting to R600 000. The proceeds of
the insurance policy on Michael’s life were paid directly to Mercia, Michael’s daughter,
as this was the condition of the policy. All the premiums were paid by Mercia and
amounted to R120 000 (including 6% interest thereon).
7. The funeral expenses paid from the estate amounted to R40 000.
8. Master’s and executor’s fees amounted to R321 580.
9. The income tax paid by the executor in respect of Michael’s final tax return amounted
to R11 000.
10. In terms of Michael’s will, the entire estate was bequeathed to his daughter, Mercia.

YOU ARE REQUIRED TO:

a) Calculate the estate duty liability of the estate of the late Michael Bester. (8)
b) Indicate how the estate duty is to be apportioned between the estate and Mercia Bester as
the only legatee. (2)

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 APPENDIX A: TAXATION MONETARY CHANGES
Applicable in respect of years of assessment commencing on or after 1 March 2022 (i.e.
2023 year of assessment) – unless specifically stated otherwise.

REBATES (section 6) 2023

Primary rebate R16 425
Secondary rebate R9 000
Tertiary rebate R2 997

TRAVEL ALLOWANCE (section 8(1)) - unchanged 2023

Cost limitation of vehicle (section 8(1)(b)(iiiA)(bb) R665 000

MEDICAL CREDITS (section 6A) 2023

Benefits to the taxpayer R347
Benefits to the taxpayer and one dependant R694
Benefits to each additional dependant R234
RESIDENTIAL ACCOMMODATION (para. 9 of the Seventh
2023
Schedule)
Symbol B R91 250

TRAVEL ALLOWANCE
Fixed cost Fuel cost Maintenance
Value of the vehicle (R)
(R/p.a.) (c/km) cost (c/km)
0 – 95 000 29 836 131,7 40,9
95 001 – 190 000 52 889 147,0 51,1
190 001 – 285 000 76 033 159,7 56,3
285 001 – 380 000 96 197 171,8 61,5
380 001 – 475 000 116 438 183,8 72,3
475 001 – 570 000 137 735 210,8 84,9
570 001 – 665 000 159 031 218,0 105,5
Exceeding 665 000 159 031 218,0 105,5

ALTERNATIVE FIXED RATE FOR CERTAIN REIMBURSIVE 2023

TRAVEL ALLOWANCES
Simplified method 418 (c/km)

AMOUNTS DEEMED TO HAVE BEEN ACTUALLY EXPENDED ON 2023

MEALS AND INCIDENTALS COSTS
Local travel
Allowance for incidental costs only (per day) R152
Allowance for meals and incidental costs (per day) R493

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