INDIVIDUALS

LECTURE EXAMPLES
Prepared by Roulon du Toit CA (SA)

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TAX FRAMEWORK

Gross Income XXX

Less: Exempt Income (XXX)
= Income XXX
Less: Deductions Excluding s11F (XXX)
Less: Assessed losses (s20) (XXX)
(travel allowance, subsistence allowance,
Add: Allowances XXX
entertainment, etc.)
XXX
Add: Taxable Capital Gain s26A XXX
XXX
Less: s11F (XXX)
XXX
Less: s18A Donations (XXX)
TAXABLE INCOME XXX

Tax per tables XXX

Less: s6 Rebates Primary, secondary, tertiary, s6quat (XXX)
Add: Other taxes Tax on lump sums, additional tax per s12T XXX
Less: s6A and s6B medical (XXX)
Less: s6quat (XXX)
NET NORMAL TAX XXX
Less: Prepaid Taxes Employees' tax, provisional tax, s35A (XXX)
NORMAL TAX LIABILITY XXX

Add: Withholding taxes e.g. withholding tax on interest XXX

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IMPORTANT NOTICE:
Refer to the student platform, to the document uploaded called: Tax Rates and Tax Tables for the tax
rates used in these lecture examples. It is based on the latest SAICA Student Handbook.
In tests/exams you must the information provided. Study the principle and not the amount.

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1. RETIREMENT CONTRIBUTIONS (s11F)

EXAMPLE 1.1
Mr A is 50 years old. He works as a full time employee for X Ltd.
During the year of assessment, Mr A earned a monthly salary of R20 000. He also earned an
annual bonus of R20 000 and commission on a customer he gained for the business of R30 000.
Mr A also earned interest from his ABSA bank account of R30 000.
During the current year of assessment, Mr A had a taxable capital gain of R29 000.
In terms of his employment contract with X Ltd, Mr A is required to contribute 8% of his salary to
company’s pension fund. He also contributed R1 000 per month to a retirement annuity fund.

REQUIRED
Calculate the taxable income for Mr A.

SUGGESTED SOLUTION
When looking at individuals, it is always important to take note whether the individual earns
mainly commission or mainly remuneration. Remember, s23(m) restricts the amount of
deductions that may be claimed if the individual earns mainly remuneration.
In this case, the individual earns mainly remuneration, so s23(m) applies.
s23(m) allows the deduction of contributions to retirement funds under s11F.

DESCRIPTION CALCULATION/EXPLANATION R
Salary 20 000 x 12 240 000
Bonus 20 000
Commission 30 000
Interest 30 000
s10(1)(i) Limited to 23 800 (23 800)
[A] 296 200

Taxable capital gain 29 000

[B] 325 200

Retirement fund
deduction (s11F) Actual: (31 200)
- Pension fund (240 000 x 8%) 19 200
- RAF (1 000 x 12) 12 000
31 200
Limited to the lesser of:
- R350 000
- 27.5% x greater of taxable income [B]
(325 200) or remuneration (290 000)
(see calc)
27.5% X 325 200 = 89 513
- taxable income (excl CGT) [A] (296 200)
The limit is thus 89 513. However, limited
to the actual contributions.

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"Remuneration" calc Taxable income (subtotal) 296 200

Less: Items not remuneration:
- Interest (30 000 - 23 800) (6 200)
REMUNERATION 290 000

TAXABLE INCOME 294 000

EXAMPLE 1.2
Mr B earns an annual salary of R300 000 and a bonus of R50 000. Mr B also earns a travel
allowance of R4 000 per month. The taxable travel allowance (after taking into account the costs
of business travel) is R5 000 for the year.
In terms of his employment contract, Mr B is required to contribute 10% of his salary to the
company’s pension fund.
Mr B also earned interest from a local bank account of R40 000.

Mr B is 41 years old.

REQUIRED
a) What is the “remuneration” figure that Mr B must use to calculate the s11F deduction?
b) What is Mr B’s taxable income?

SUGGESTED SOLUTION
a)
The “remuneration” figure to use in s11F must be determined using the definition of
“remuneration” in para1 of the Fourth Schedule.

80% of the travel allowance (before deductions) is considered “remuneration”. We do not use the
taxable portion of the travel allowance that was calculated (R5 000). That will form part of his
taxable income (see (b) below).

DESCRIPTION R
Salary 300 000
Bonus 50 000
Travel allowance (4 000 x 12) x 80% 38 400
REMUNERATION 388 400

b)
DESCRIPTION CALCULATION/EXPLANATION R
Salary 300 000
Bonus 50 000
Interest 40 000
s10(1)(i) Limited to 23 800 (23 800)
Taxable part of travel
allowance 5 000
A/B 371 200
Retirement fund
contributions (s11F) Actual: 300 000 x 10% 30 000

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Limited to the lesser of:

- 350 000; OR
- 27.5% x the greater of remuneration (388 400)
or taxable income [B] (371 200)
27.5% x 388 400 = 106 810
- taxable income excl CGT [A] (371 200)

Limit is thus 106 810

Limited to actual contributions. (30 000)

TAXABLE INCOME 341 200

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2. REBATES
EXAMPLE 2.1
Mr A has a taxable income of R700 000 for the year of assessment.

REQUIRED
You are required to calculate the normal tax for the year if
a) Mr A is 40 years old
b) Mr A is 65 years old
c) Mr A is 75 years old

SUGGESTED SOLUTION
Use the tax table that is provided in the latest version of the SAICA Student Handbook.

a)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)
Normal tax payable 181 316

b)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)
(8 613)
Normal tax payable 172 703

c)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)
Secondary rebate (s6(2)(b)) (8 613)
Tertiary rebate (s6(2)(c)) (2 871)
Normal tax payable 169 832

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EXAMPLE 2.2
Mr F passed away at the age of 74 on 31 December 20x5. Mr F would have celebrated his 75th
birthday on 24 February 20x6.
Mr F’s taxable income for the 20x6 year was R800 000.

REQUIRED
You are required to calculate the normal tax payable by Mr F for the 20x6 year of assessment.

SUGGESTED SOLUTION
It is important to note that Mr F was not 75 years at the time of his death. However, if he had
lived until the last day of the year of assessment (last day of February) he would have been 75
years old. He will therefore qualify for the s6(2)(c) rebate (tertiary rebate).

As the taxpayer passed away during the year, he was only assessed for the period that he was
alive. Therefore, the available rebates must be apportioned.

DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 800 000

Tax per tables 229 089 + 41% (800 000 - 782 800) 236 141
Primary rebate (s6(2)(a)) 15 715 x 10/12 (13 096)
Secondary rebate (s6(2)(b)) 8 613 x 10/12 (7 178)
Tertiary rebate (s6(2)(c)) 2 871 x 10/12 (2 393)

Normal tax payable 213 475

EXAMPLE 2.3
Miss A was a full-time student until November 20x5 when she completed her studies. She is 23
years old. As a full-time student she was fully dependant on her parents as she did not earn any
income.
After obtaining her qualification, she immediately started to apply for jobs and she was fortunate
enough to be offered employment at X Ltd that would commence on 1 January 20x6.
From 1 January 20x6 she earned a salary of R55 000 per month.
In terms of the rules of the company’s pension fund, she is required to contribute 6% of her salary
to the pension fund.

REQUIRED
You are required to calculate the normal tax payable by Miss A for the 20x6 year of assessment.

SUGGESTED SOLUTION
It is important to note that the rebates that are available to the taxpayer in terms of s6 will NOT
be apportioned in this case. Although Miss A only worked for 2 months in the tax year, she was
still assessed for the entire tax year.
We only apportion the rebates
- on death
- on birth
- on insolvency

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DESCRIPTION CALCULATION/EXPLANATION R
Salary 55 000 x 2 110 000
Retirement contributions
(s11F) Actual: 110 000 x 6% = 6 600
Limited to the lesser of
• 350 000 or
• 27.5% x greater of taxable income (110 000)
or remuneration (110 000)
110 000 x 27.5% = 30 250
(6 600)
• taxable income excl CGT (110 000)

Limit is thus 30 250

Limited to actual contributions

TAXABLE INCOME 103 400

Normal tax per tables 103 400 x 18% 18 612

Primary rebate (s6(2)(a)) (15 715)

Normal tax payable 2 897

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3. s6A & s6B MEDICAL TAX CREDITS

EXAMPLE 3.1
Mr A is the main member on Recovery Medical Aid. He is married and he has a 20 year old son. Mr
A’s wife, the son and his sister are all dependants on the medical aid. Mr A contributes R6 000 a
month to the medical aid.
For the year of assessment, Mr A’s taxable income was R700 000.
Mr A had no other qualifying medical expenses.

REQUIRED
You are required to calculate the normal tax payable by Mr A if
a) Mr A is 45 years old
b) Mr A is 65 years old
c) Mr A is 50 years old and his wife is disabled

SUGGESTED SOLUTION
The required provides us with the 3 broad categories of situations that are discussed in s6B which
are:
- taxpayer is younger than 65 and makes no payment in respect of a disabled person
(taxpayer, spouse or child)
- taxpayer is 65 or older
- taxpayer is any age and makes a payment in respect of disabled person (taxpayer, spouse
or child)

However, it is very important to note that in this question there are no ‘qualifying medical
expenses’. There are only contributions that have been made to the medical aid.
It is important that you remember that s6A applies if there are contributions made to a medical
aid and s6B applies if there are ‘qualifying medical expenses’, which can be contributions to a
medical aid and/or other expenses not paid by the medical aid.
You will thus almost always consider s6B.

Further, it should be noted that the treatment for the different categories of taxpayers are
identical for s6A.
Thus, a), b) and c) will have the same s6A medical scheme fees tax credit.

The s6A medical scheme fees tax credit is determined by the number of dependants.
In this case there is Mr A, his spouse, his son and his sister, which are four people.
The s6A medical scheme fees tax credit per month is thus R638 (for Mr A and spouse) + R215
(son) + R215 (sister) = R1 068 per month.

a)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)

Normal tax 181 316

s6A (332 + 332 + 224 + 224) x 12 (13 344)

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Medical aid contributions

s6B(3)(c) 72 000
(6 000 x 12)
Less: 4 x s6A (53 376)
18 624
Other qualifying expenses 0
18 624
Less: 7.5% of taxable income (52 500)
0 0

Net normal tax payable xxx

b)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)
Secondary rebate (s6(2)(b)) (8 613)
Normal tax 172 703

s6A (332 + 332 + 224 + 224) x 12 (13 344)

Medical aid contributions

s6B 72 000
(6 000 x 12)
Less 3 x s6A (40 032)
31 968
x 33.3% (10 645)
Other qualifying expenses 0
x 33.3% 0

Net normal tax payable xxx

c)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)

Normal tax 181 316

s6A (332 + 332 + 224 + 224) x 12 (13 344)

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Medical aid contributions

s6B 72 000
(6 000 x 12)
Less 3 x s6A (40 032)
31 968
x 33.3% (10 645)
Other qualifying expenses 0
x 33.3% 0

Net normal tax payable xxx

EXAMPLE 3.2
This example is similar to the previous example but now the taxpayer has qualifying medical
expenses that must also be taken into account.

Mr A is the main member on Recovery Medical Aid. He is married and he has a 20 year old son. Mr
A’s wife, the son and his sister are all dependants on the medical aid. Mr A contributes R6 000 a
month to the medical aid.
For the year of assessment, Mr A’s taxable income was R700 000.
Mr A had other qualifying medical expenses of R60 000.

REQUIRED
You are required to calculate the normal tax payable by Mr A if
a) Mr A is 45 years old
b) Mr A is 65 years old
c) Mr A is 50 years old and his sister is disabled
d) Mr A is 50 years old and his wife is disabled

SUGGESTED SOLUTION
In this case there is other qualifying medical expenses of R60 000. These qualifying medical
expenses must be considered in the s6B additional medical expenses tax credit calculation.

Again, note that there are three different situations:

- taxpayer is younger than 65 and makes no payment in respect of a disabled person
(taxpayer, spouse or child)
- taxpayer is 65 or older
- taxpayer is any age and makes a payment in respect of disabled person (taxpayer, spouse
or child)
It is important to note that s6B(3)(b) only applies if the person that is disabled is the taxpayer,
spouse or the child. Thus in situation c) when it is the taxpayer’s sister that is disabled, s6B(3)(b)
cannot apply.

a)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)

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Normal tax 181 316

s6A (332 + 332 + 224 + 224) x 12 (13 344)

s6B(3)(c) Medical aid fees paid:

- by taxpayer 6 000 x 12 72 000
- by employer (fringe benefit) 0
72 000
Less: 4 x s6A (53 376)
18 624
Plus: Other qualifying expenses 60 000
78 624
Less: 7.5% of taxable income (52 500)
Excess 26 124
x 25%
s6B additional credit 6 531 (6 531)

Net normal tax payable xxx

b)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)
Secondary rebate (s6(2)(b)) (8 613)
Normal tax 172 703

s6A (332 + 332 + 224 + 224) x 12 (13 344)

s6B Medical aid fees paid:

- by taxpayer 6 000 x 12 72 000
- by employer (fringe benefit) 0
72 000
Less: 3 x s6A (40 032)
31 968
x 33.3% (10 645)

Other qualifying expenses 60 000

x 33.3% (19 980)

Net normal tax payable xxx

c)

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DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)

Normal tax 181 316

s6A (332 + 332 + 224 + 224) x 12 (13 344)

The disabled person is not the

s6B taxpayer, spouse or child, thus
s6B(3)(a) does not apply

Medical aid fees paid:

- by taxpayer 6 000 x 12 72 000
- by employer (fringe benefit) 0
72 000
Less: 4 x s6A (53 376)
18 624
Plus: Other qualifying expenses 60 000
78 624
Less: 7.5% of taxable income (52 500)
Excess 26 124
x 25%
s6B additional credit 6 531 (6 531)

Net normal tax payable xxx

d)
DESCRIPTION CALCULATION/EXPLANATION R
Taxable income 700 000

Tax per tables 163 335 + 39% (700 000 - 613 600) 197 031
Primary rebate (s6(2)(a)) (15 715)

Normal tax 181 316

s6A (332 + 332 + 224 + 224) x 12 (13 344)

s6B Medical aid fees paid:

- by taxpayer 6 000 x 12 72 000
- by employer (fringe benefit) 0
72 000

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Less: 3 x s6A (40 032)

31 968
x 33.3% (10 645)

Other qualifying expenses 60 000

x 33.3% (19 980)

Net normal tax payable xxx

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4. MARRIAGE IN COMMUNITY OF PROPERTY

EXAMPLE 4.1
Mr A and Mrs B are married. They are both under the age of 65.
The information below relates to amounts that they have received during the year of assessment.

DESCRIPTION NOTE MR A MRS B

Salary 350 000 240 000
Bonus 30 000
Overtime 20 000
Interest earned from bank 60 000
Rental: fixed property 1 24 000
Rental: movable property 2 6 000
Royalties from patent 3 35 000
Proceeds: property sold 4 3 500 000

NOTES:
1)
Mr A received R24 000 during the year which is rentals received from a holiday home on the Vaal
dam that is let to third parties.

2)
Mr A owns a boat that is kept at the Vaal dam. The boat is let out to holidaymakers and Mr A
received R6 000 for the letting of the boat.

3)
Mrs B designed a patent 10 years ago. This patent is used by persons in the USA. She received
R35 000 in respect of royalties on the payment.

4)
During the year, Mr A sold the home that he and Mrs B had been staying in for the last ten years.
The home is registered in his name and has a base cost of R500 000.

REQUIRED
You are required to calculate the taxable income for Mr A and Mrs B if
a) They are married out of community of property
b) They are married in community of property

SUGGESTED SOLUTION
a)
Mr A
DESCRIPTION CALCULATION/EXPLANATION CGT R
Salary 350 000
Bonus 30 000
Interest 60 000
s10(1)(i) Limited to R23 800 (23 800)
Rental: fixed property 24 000
Rental: movable property 6 000
Sale of property Proceeds 3 500 000

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Base cost (500 000)

Capital gain 3 000 000
Primary residence exclusion (para 45) (2 000 000)
Capital gain 1 000 000
1 000 000
Annual exclusion (40 000)
Aggregate capital gain 960 000
Capital loss brought forward 0
Net capital gain 960 000
Inclusion rate 40%
Taxable capital gain 384 000 384 000
TAXABLE INCOME 830 200

Mrs B
DESCRIPTION CALCULATION/EXPLANATION CGT R
Salary 240 000
Overtime 20 000
Royalties 35 000
TAXABLE INCOME 295 000

b)
When the taxpayers are married in community of property, s7(2A) and (2C) will apply.
Per s7(2A) the income that is NOT from a trade and the income received from the letting of fixed
property must be deemed to have been earned 50/50 by each of the spouses.
The income that is from a trade (such as salaries and other business activities) must only be
included in the taxable income of the taxpayer that carried on that trade.
Note that per s7(2C), the income earned from a patent will be deemed to be from the carrying on
of a trade. In other words, it will only be included in the income of the taxpayer to whom it
accrued.

Furthermore, when calculating the capital gain on the disposal of the property, it is important to
remember that the primary residence exclusion under para45 is applicable on a per residence
basis and not on a per person basis. Therefore, it must be split for ownership.

Mr A
DESCRIPTION CALCULATION/EXPLANATION CGT R
Salary Not split. Carrying on of trade. 350 000
Bonus Not split. Carrying on of trade. 30 000
Overtime (Mrs A) Not split. Carrying on of trade. 0
Interest 60 000 x 50% (s7(2A)) 30 000
s10(1)(i) Limited to R23 800 (23 800)
Rental: fixed property 24 000 x 50% (s7(2A)) 12 000
Rental: movable
property Not split. Carrying on of trade. 6 000
Royalties (Mrs A) Not split. Carrying on of trade. (s7(2C)) 0
Sale of property Proceeds 3 500 000

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Base cost (500 000)

Capital gain 3 000 000
Primary residence exclusion (para 45) (2 000 000)
Capital gain 1 000 000

Mr A's share 1 000 000 x 50% 500 000

500 000
Annual exclusion (40 000)
Aggregate capital gain 460 000
Capital loss brought forward 0
Net capital gain 460 000
Inclusion rate 40%
Taxable capital gain 184 000 184 000
TAXABLE INCOME 588 200
Mrs B
DESCRIPTION CALCULATION/EXPLANATION CGT R
Salary Not split. Carrying on of trade. 240 000
Bonus (Mr A) Not split. Carrying on of trade. 0
Overtime Not split. Carrying on of trade. 20 000
Interest 60 000 x 50% (s7(2A)) 30 000
s10(1)(i) Limited to R23 800 (23 800)
Rental: fixed property 24 000 x 50% (s7(2A)) 12 000
Rental: movable
property (Mr A) Not split. Carrying on of trade. 0
Royalties Not split. Carrying on of trade. (s7(2C)) 35 000
Sale of property Proceeds 3 500 000
Base cost (500 000)
Capital gain 3 000 000
Primary residence exclusion (para 45) (2 000 000)
Capital gain 1 000 000

Mrs A's share 1 000 000 x 50% 500 000

500 000
Annual exclusion (40 000)
Aggregate capital gain 460 000
Capital loss brought forward 0
Net capital gain 460 000
Inclusion rate 40%
Taxable capital gain 184 000 184 000
TAXABLE INCOME 497 200

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