Question 1
Arisa Rampaul (“Arisa”), a resident, aged 62 years and unmarried, is one of the managers at
Toothless (Pty) Ltd (‘Toothless’) a business based in Durban. Arisa is a dietician and visits
schools and communities in KwaZulu-Natal, advising on healthy eating plans and marketing
Toothless products.
Toothless sells healthy food items. Toothless also has a fully furnished gymnasium for
members of the general public with trainers and a team of health professionals who formulate
healthy eating plans.
Since Arisa became permanently incapable of holding her employment due to an unexpected
illness, she retired from Toothless on 28 February 2017. For her loss of office Toothless paid
Arisa a lump sum of R150 000 on 20 February 2017. On the 28 February 2017, Toothless paid
Arisa her accumulated leave pay of R17 000.
During the 2017 year of assessment Arisa received a cash salary of R14 500 per month and an
annual bonus of R60 000 in February 2017. Arisa contributed 16.5% of her monthly cash salary
to the Toothless Pension Fund until she retired.
During the 2017 year of assessment Arisa also contributed R3 000 per month to a retirement
annuity fund. During the 2017 year of assessment Toothless did not take Arisa’s retirement
annuity contributions into account in determining the employees’ tax to be withheld from her
remuneration. Prior to the 2017 year of assessment, all of Arisa’s contributions to the retirement
annuity fund had been fully deductible.
On the 28 February 2017, Arisa elected and received R750 000 as a retirement fund lump sum
benefit from the Toothless Pension Fund. On receipt Arisa immediately transferred R50 000
of the retirement fund lump sum benefit to her retirement annuity fund. Arisa utilised the
balance of R700 000 to acquire shares on the Johannesburg Stock Exchange. Arisa received
her first pension annuity receipt from the Toothless Pension Fund on 31 March 2017. At the
end of the 2016 year of assessment, Arisa’s pension fund contributions to the value of R10 000
had not qualified as a deduction under section 11(k).
Toothless required all its employees to join a medical aid scheme. Arisa contributed R900 per
month to the medical aid scheme and Toothless matched her contributions to the medical
scheme during the 2017 year of assessment. Arisa incurred qualifying medical costs of R11 100
for special dentistry, of which only R4 100 was recoverable from the medical aid during her
2017 year of assessment.
Arisa purchased a motor vehicle, a BMW 235i on 1 March 2016. Toothless paid all of their
managers a monthly travel allowance of R3 000. Arisa acquired her motor vehicle, for an arm’s
length cost of R450 000 including value-added tax. Arisa meticulously keeps a log book
detailing all her travels. Arisa travelled a total of 72 000 kilometres during the 2017 year of
assessment of which 52 000 kilometres were for business purposes. Arisa paid the full fuel cost
of R25 000 and the full maintenance cost of R30 000 for her motor vehicle during the 2017
year of assessment.
Arisa was given the use of a 5-roomed flat owned by Toothless on 1 March 2016. Although
the flat was provided to Arisa unfurnished, power and fuel was supplied by Toothless for the
flat. Arisa moved out of the flat upon her retirement.
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Arisa borrowed funds to the value of R150 000 on 1 March 2016 from Toothless to purchase
her furniture. Arisa paid interest of 2% on the loan to Toothless. On the 28 February 2017, and
since Arisa had not repaid any of the outstanding capital on the loan to Toothless, Toothless
released Arisa from her obligation to repay her debt.
Arisa diligently saves and invests. During the 2017 year of assessment, Arisa received local
dividends of R22 000 and foreign dividends of R12 000, that are not exempt under s10B(2)
from her investment portfolio.
Arisa operates a business on a part-time basis to supplement her income. Her business involved
the knitting of booties and hats for babies. During the 2017 year of assessment she earned
revenues of R53 000 and incurred tax deductible costs of R7 200.
Calculate Arisa’s normal tax liability for the year of assessment ended 28 February 2017.
Show all workings. Ignore value-added tax implications. Round off to the nearest rand.
You can assume that:
• The official rate of interest during the period 1 March 2016 to 28 February 2017 was
8%;
• Arisa’s remuneration proxy is R400 000;
• Arisa had not received any retirement fund lump sum benefits, retirement fund lump
sum withdrawal benefits or severance benefits prior to 1 March 2016; and
No employees’ tax has been withheld on the lump sum of R150 000 and the lump sum of
R750 000.
ASSUME THAT THE 2021 INCOME TAX LEGISLATION AND 2021 RATES OF TAX ARE APPLICABLE
THROUGHOUT THE ABOVE YEARS OF ASSESSMENT.
(Adapted from Tax 3B Test 1 2017)
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