UNIVERSITY OF THE WESTERN CAPE
TERM TEST 2
8 October 2022
MODULE NAME : TAXATION 242
MODULE CODE : TAX 242
DURATION : 2.25 HOURS (135 Minutes) + 30 min submission
TOTAL MARKS time
: 75 MARKS
Examiner/s: Mrs Mongane and Mrs Raymond
Internal Moderator: Mrs Edna Hamel
EXAMINER’S INSTRUCTIONS:
1. Answer all the questions.
2. Answers must be in blue or black ink.
3. Please refrain from using any Tippex.
4. Your answer can be done written or typed out. If you are using word, just “save as” PDF.
5. Please submit your answer paper in PDF format to [email protected]
6. Clearly indicate your student number and name and surname in order to make it easy to sort. If
you do not have word or are submitting a written paper, scan in the paper using a scanner or via
a similar scanning app on your smartphone. Turboscan, ScannerApp etc. These apps should be
available on android and apple stores and are usually free.
7. Please submit before 11:40am
1
QUESTION 1 40 marks, 72 minutes
Justin Everts (34 years old) is a South Africa resident. Justin has been working for
Civil Engineers Limited since he was 23 years old. Justin is married out of community of
property with his wife, Sybil, and they have a son of three years old. Justin and his family are
on his medical aid. Civil Engineers Limited is a company which operates in the engineering
industry.
The following information relates to Justin employment:
Justin receives a monthly salary of R45 000 from Civil Engineers Limited.
Civil Engineers Limited also contribute 50% of Justin’s medical aid contribution and 60% of
his retirement annuity fund contribution. Justin’s total medical aid and retirement annuity fund
contributions amount to R6 500 and R7 000 per month respectively.
As part of Justin’s benefits from Civil Engineers Limited, he and his family can stay in a house
which is rented by Civil Engineers Limited. Civil Engineers Limited provides this
accommodation due to the location in which Justin works. Civil Engineers Limited pays
monthly rent of R15 500 for the house. The house consists out of four bedrooms and
Civil Engineers Limited pays for the municipality bills, including electricity for the house. Justin
pays a monthly amount of R2 000 to Civil Engineers Limited. Justin’s remuneration factor of
the previous year of assessment was R600 000. Nor Justin or his family has any interest or
shareholding in Civil Engineering Limited.
One of Civil Engineers Limited’s manager heard Justin talk to some of his colleagues and he
mentioned that he needs a new laptop for personal use, but new laptops are so pricey. The
manager then thought it would be a good idea if Civil Engineers Limited buys the laptop and
sell it to Justin at a reduced price. Civil Engineer Limited bought the laptop for R13 500 on
2 May 2021 and sold it to Justin for R3 500 on 3 May 2021. When Civil Engineers Limited
bought the laptop, it had a market value of R15 000. Civil Engineers Limited received a
discount from the supplier of the laptop.
Civil Engineers Limited replaced most of its motor vehicles and Justin purchased a motor
vehicle from Civil Engineers Limited for R80 000 on 15 July 2021. At the date of the purchase,
the motor vehicle had a market value of R150 000 and Civil Engineers Limited originally paid
R350 000 for this vehicle.
Civil Engineers Limited took all the staff members out for a lunch to celebrate the success of
the company. It is estimated that Justin ate food to the value of R500 during this outing.
Justin was required to work in a remote area for four months during the 2022 year of
assessment. The location of where Justin worked was 400km away from his normal residence.
During the second month that Justin worked away from home, Civil Engineers Limited paid
R5 600 in transport cost for Justin’s wife and son to visit him one weekend. Justin was not
required to reimburse Civil Engineers Limited for this cost.
Civil Engineers Limited owns a holiday house in Hermanus. While Justin was on leave he and
his family stayed at the holiday house for 10 days without paying any rent. Civil Engineers
Limited normally rents out the house for R1 000 per day.
Justin felt that it would be important for him to buy a house for him and his family. He did
however not want to take a mortgage bond with the bank and he approached Civil Engineers
Limited and they agreed to give him a loan of R2 500 000 on 1 December 2021. Based on the
agreement between Justin and Civil Engineers Limited, interest at 6% will be charged on the
2
loan. Justin bought the new house for him and his family in June 2022. The official interest
rate throughout the 2022 year of assessment amounted to 9.5%.
Justin was rewarded with a watch to the value of R20 000 on 5 January 2022 for his long
service at Civil Engineers Limited.
The following information relates to income Justin receives which is not related to his
employment:
Justin received interest from his money market savings account (not tax-free investment) of
R34 000.
Justin earn local dividends (gross of dividends tax) of R15 000 during the 2022 year of
assessment.
Possible future additional employment benefit:
Justin was recently approached by Civil Engineers Limited to possible work in a different area.
This will require Justin to drive for about an hour to work every day. It is estimated that Justin
will drive 85 000 km in total per year, of which 23 000km will be for private use. Civil Engineers
Limited provided Justin with the following two options to assist him with the extra costs:
Option 1:
The first option is a monthly travel allowance of R6 000. Justin will then use his own BMW to
go drive around in. Justin purchased the BMW for R530 000 0n 1 March 2021 and it came
with a maintenance plan.
Justin will incur the following cost for the full year:
Petrol: R30 000
Insurance R12 500
Option 2:
Justin will have the use of one of Civil Engineers Limited’s vehicles. Civil Engineers Limited
purchased a Ford Ranger for R590 000 (including VAT) on 1 March 2021. Justin will be using
the vehicle for the full year of assessment. Justin will only incur petrol costs of R32 000 for the
full year of assessment.
REQUIRED Marks
Show all your calculations and round off to the nearest Rand.
(a) Calculate Justin Oliver’s normal tax liability for the 2022 year of assessment. 28
Provide a reason if an amount is not included in the calculation. 1
Communication skills - Framework
(b) Calculate which of the two options provided to Justin Oliver (travel allowance
versus right of use of motor vehicle) will be most beneficial for tax purposes for 11
Justin.
TOTAL MARKS 40
3
QUESTION 2 15 marks, 27 minutes
Mr. Hashland, a South African resident, aged 45 received a salary of R 24 000 per month from
the period 1 March 2021. He also receives a travel allowance of R 6000 per month from his
employer. Mr. Hashland also receives a cellphone allowance of R 3000 per month.
Mr. Hashland makes monthly pension fund contributions of R 2 200 per month. His employer
does not contribute to Mr. Hashland’s pension fund. During the month of January 2022,
Mr. Hashland received a bonus of R 15 000.
REQUIRED Marks
Show all your calculations and round off to the nearest Rand.
Calculate the employee’s tax deductible from Mr. Hashland’s remuneration for the month
of January 2022.
15
TOTAL MARKS 15
4
QUESTION 3 20 marks, 36 minutes
Baela Tully a South African resident, aged 34 works for a sporting goods supply company and
sells sporting goods in her spare time. She is not married in community of property.
Her receipts and expenses for the 2022 year of assessment are set out below.
1. She earned a total salary of R 260 000.
2. She received an annual performance bonus of R80 000 at the end of January 2022.
3. She earned interest of R 16 000 from a local investment. (not a tax-free investment).
4. She earned foreign dividends of R 18 000 – her shareholding in the company is 4%.
5. She contributes a monthly amount of R 6 000 towards the company pension fund. She
contributes R 800 per month towards her RAF. Her employer contributes R 3000 per
month to her pension fund.
6. She receives a travel allowance of R 4 500 per month from her employer as well as an
entertainment allowance of R 2 200 per month. She maintained a log book for the year
and the reduction of the travel allowance upon assessment is R 23 000 (correctly
calculated).
7. Baela sells sporting goods for her own account in her spare time and for the year of
assessment:
She generated R 95 000 in sales.
Her garage is too small to store her sporting goods inventory, so she has been
renting a storage space at R 1 650 per month since June 2021.
Her niece works with her over the weekends and Baela pays her a salary of R
2 600 per month. She has been working for Baela since October 2021. The
salary paid to her niece is market realted and not excessive.
She incurred subscription fees of R3 000 for the year, which she needs to
maintain her website.
8. Baela also owns 2 rental properties. Total rental income of R150 000 was earned.
9. Painting and retiling expenses of R 25 000 was incurred in relation to the rental properties
for the year of assessment.
10. She also had a fence erected around one of the properties at a cost of R15 000 during
the year of assessment.
5
REQUIRED Marks
Calculate Baela Tully’s taxable income for the 2022 year of assessment. If an amount is
19
not included in taxable income, provide a reason as to why.
Communication skills - Framework 1
TOTAL MARKS 20
6
Appendix A – Rates for year of assessments ending 28 February 2022
REBATES (section 6)
Primary rebate increases from R14 958 to R15 714
Secondary rebate increases from R8 199 to R8 613
Tertiary rebate increases from R2 736 to R2 871
MEDICAL REBATES (section 6A)
Benefits to the taxpayer: increases from R319 to R332
Benefits to the taxpayer and one dependant: Increases from R638 to R664
Benefits to each additional dependant: increases from R215 to R 224.
RATES OF NORMAL TAX
Taxable income (R) Rates of tax (R)
1 – 216 200 18% of taxable income
216 201 – 337 800 38 916 + 26% of taxable income above 216 200
337 801 – 467 500 70 532 + 31% of taxable income above 337 800
467 501 – 613 600 110 739 + 36% of taxable income above 467 500
613 601 – 782 200 163 335 + 39% of taxable income above 613 600
782 201 – 1 656 600 229 089 + 41% of taxable income above 782 200
1 656 601 and above 587 593 + 45% of taxable income above 1 656 600
Travel Allowance
Value of the vehicle (R) Fixed cost (R p.a) Fuel cost (c/km) Maintenance cost (c/km)
0 - 95 000 31 332 105.8 37.4
95 001 - 190 000 55 894 118.1 46.8
190 001 - 285 000 80 539 128.3 51.6
285 001 - 380 000 102 211 138.0 56.4
380 001 - 475 000 123 955 147.7 66.2
475 001 - 570 000 146 753 169.4 77.8
570 001 - 665 000 169 552 175.1 96.6
more than 665 000 169 552 175.1 96.6
Alternative fixed rate for certain reimbursive travel allowances: 361 cents per
kilometre.
Table A
7
THE EXPECTATION OF LIFE AND THE PRESENT VALUE OF R1 PER ANNUM FOR LIFE
CAPITALISED AT 12 PER CENT OVER THE EXPECTATION OF LIFE OF MALES AND
FEMALES OF VARIOUS AGES
Expectation of life Present value of R1 per annum for life
Age Male Female Male Female Age
8
Expectation of life Present value of R1 per annum for life
Age Age
Male Female Male Female
43 27,02 32,77 7,94344 8,130 12 43
44 26,20 31,89 7,90547 8,108 81 44
45 25,38 31,01 7,86380 8,085 27 45
46 24,58 30,14 7,81924 8,059 56 46
47 23,79 29,27 7,77109 8,031 19 47
48 23,00 28,41 7,71843 8,000 26 48
49 22,23 27,55 7,662 36 7,966 17 49
50 21,47 26,71 7,602 01 7,929 50 50
51 20,72 25,88 7,537 13 7,889 67 51
52 19,98 25,06 7,467 48 7,846 46 52
53 19,26 24,25 7,393 87 7,799 65 53
54 18,56 23,44 7,316 31 7,748 34 54
55 17,86 22,65 7,232 34 7,693 55 55
56 17,18 21,86 7,144 14 7,633 63 56
57 16,52 21,08 7,051 78 7,568 96 57
58 15,86 20,31 6,952 25 7,499 27 58
59 15,23 19,54 6,850 04 7,423 21 59
60 14,61 18,78 6,742 06 7,341 35 60
61 14,01 18,04 6,630 10 7,254 57 61
62 13,42 17,30 6,512 32 7,160 20 62
63 12,86 16,58 6,393 01 7,060 46 63
64 12,31 15,88 6,268 22 6,955 37 64
65 11,77 15,18 6,137 89 6,841 61 65
66 11,26 14,51 6,007 26 6,723 93 66
67 10,76 13,85 5,871 65 6,598 93 67
68 10,28 13,20 5,734 03 6,466 35 68
69 9,81 12,57 5,591 82 6,328 18 69
70 9,37 11,96 5,451 65 6,184 66 70
71 8,94 11,37 5,307 75 6,036 07 71
72 8,54 10,80 5,167 44 5,882 78 72
73 8,15 10,24 5,024 37 5,722 22 73
74 7,77 9,70 4,878 76 5,557 43 74
75 7,41 9,18 4,734 90 5,388 93 75
76 7,07 8,68 4,593 54 5,217 27 76
77 6,73 8,21 4,446 63 5,046 79 77
78 6,41 7,75 4,303 09 4,870 92 78
79 6,10 7,31 4,158 98 4,693 89 79
80 5,82 6,89 4,024 40 4,516 47 80
81 5,55 6,50 3,890 51 4,343 99 81
82 5,31 6,13 3,768 02 4,173 15 82
83 5,09 5,78 3,652 76 4,004 82 83
84 4,89 5,45 3,545 46 3,839 88 84
85 4,72 5,14 3,452 32 3,679 21 85
86 4,57 4,85 3,368 64 3,523 71 86
87 4,45 4,58 3,300 66 3,374 26 87
88 4,36 4,33 3,249 07 3,231 75 88
89 4,32 4,11 3,225 97 3,102 96 89
90 4,30 3,92 3,214 38 2,989 12 90
9
Table B
PRESENT VALUE OF R1 PER ANNUM CAPITALISED AT 12 PER
CENT OVER FIXED PERIODS
10
