QUESTION 3 [35 marks]
Phila Siwela is a fashion buyer for Gucci Designs Ltd, a South African company and a
registered VAT vendor. She has been working for Gucci Designs Ltd for the last five
years. She is a South African resident and lives in Hout Bay in Cape Town. Phila is age
35, is married to Jimmy, age 39 and they have two children that are school-going. Phila
and Jimmy are married out of community of property. She worked for Gucci Designs
Ltd throughout the year of assessment ended 29 February 2024.
The following information relates to Phila Chu’s employment at Gucci Designs Ltd for
the year of assessment ending 29 February 2024:
1. Phila receives a cash salary of R28 000 per month
2. She also received a performance bonus of R90 000 and a thirteenth cheque,
equivalent to one month’s cash salary.
3. Phila was provided with exclusive use of a motor vehicle (a motor car as defined
forVAT purposes) from 1 February 2023 and in addition she also received a travel
allowance of R2 400 per month on the same vehicle. It was purchased by Gucci
Designs Ltd for R198 000 (excluding VAT) on 1 February 2023. Gucci Designs Ltd
also paid 14% VAT of R27 720 when it purchased this motor vehicle. The motor
vehicle was purchased with a full maintenance plan. Phila does not contribute
towards the maintenance costs. All other costs in respect of the motor vehicle are
borne by her employer. She is allowed to take the motor vehicle home each night
andalso has unlimited weekend use of it. Phila travelled a total of 21 654 kilometers
in this motor vehicle up to 29 February 2024, of which 3 897 kilometers were
travelled for business purposes as shown by her log book.
4. Phila is a member of her employer’s provident fund. Both her employer and she
contribute 6% of her cash salary only to a provident fund.
5. Phila contributed R1 800 per month towards a retirement annuity fund and Gucci
Designs Ltd also contributed R1 800 per month. An amount of R28 000 relating to
disallowed current retirement annuity fund contributions was carried forward from
the2011 year of assessment.
6. She is also a beneficiary on her husband's medical aid fund. Contributions made
to the medical aid by Jimmy for the entire year amounted to R36 000 (R3 000 per
month for Jimmy, Phila and their two children). Jimmy paid R29 330 in qualifying
medical expenses during the 2024 year of assessment. The medical aid refunded
him an amount of R18 140 for the medical expenses that he paid.
7. A reimbursive entertainment allowance was given to Phila as she is required to
entertain clients on a regular basis. She was reimbursed for entertaining expenses
actually incurred of R 13 890.
8. Gucci Designs Ltd requires Phila to be a member of ‘Fashion Designers South
Africa’, a professional body that maintains standards in fashion design. Her annual
subscription amounted to R2 600, which was paid by Gucci Designs Ltd.
9. She also receives a cell phone allowance of R900 per month. Phila estimates that
she uses her cell phone for 80% business use. Her actual cell phone costs
amountedto R8 747.
10. Phila receives a subsistence allowance of R350 per night away from home due to
local travel. Phila spent 12 days away from home on local travel. The subsistence
allowance is paid to Phila to cover the costs of meals and other incidental costs
while away from home. Phila has kept an accurate record of her meals and
incidental costs that she spent while away from home. The total amount of these
costs amounted to R4 500.
11. During September 2023, Gucci Designs Ltd settled a debt of R4 300 that Phila
owed to a clothing store.
12. Gucci Designs Ltd has its own library and allows employees to take books home
for private use. Phila made use of books from 1 November 2011 to 30 November
2023which cost her employer R912 (including VAT) and which had a market
value ofR684 (including VAT).
13. Gucci Designs Ltd granted each of Donna’s two children a bursary. Donna’s son,
Vernon, was granted a bursary of R25 000 towards his high school fees, while
Donna’s daughter, Suri, was granted a R15 000 bursary towards her junior school
fees. Only children of employees qualify as beneficiaries of a bursary. The
Commissioner regards this bursary scheme as a ‘closed’ scheme.
Other information:
· Phila received an annuity of R1 500 a month for the entire 2024 year of assessment.
She purchased the annuity on 1 March 2005 for R240 000 for a 20 year
period.
· Phila is a very benevolent individual. She contributed R20 000 towards the Cancer
Association of South Africa which is a registered PBO. She received the required
certificate for her donation.
· On 30 September 2023, Phila sold her holiday apartment in Knysna for R1 850 000.
She purchased the holiday apartment five years ago for R1 200 000. She spent R60
000 on improvements to the apartment before selling it. She also paid agent's
commission of R90 000 on the sale of the apartment.
· Phila has an assessed capital loss of R40 000 from the 2023 year of assessment.
You are required to:
Calculate the normal tax liability of Phila Siwela for the year of assessment ended 2 9
February 2024.Show all calculations either by showing the calculation next to the
description of the item or by way of a number in a notes column, and a corresponding
note
Calculations in notes column:
1. Cash salary per month: R28 000 x 12 = R336 000
2. Performance bonus: R90 000
3. Thirteenth cheque: R28 000
4. Value of motor vehicle: R198 000 x 1.14 = R225 720
5. Travel allowance per month: R2 400 x 12 = R28 800
6. Provident fund contributions: R28 000 x 6% x 2 = R3 360
7. Retirement annuity fund contributions: R1 800 x 12 = R21 600
8. Contribution to medical aid fund: R36 000
9. Actual cell phone costs: R8 747 x 20% = R1 749.40
10. Subsistence allowance for local travel: R350 x 12 = R4 200
11. Debt settlement: R4 300
12. Library book usage: R912 - R684 = R228
13. Bursary granted to children: R25 000 + R15 000 = R40 000
14. Annuity received: R1 500 x 12 = R18 000
15. Donation to Cancer Association: R20 000
16. Capital gain on sale of holiday apartment: (R1 850 000 - R1 320 000) - R60 000 - R90 000 = R380 000
17. Net capital loss carried forward: R40 000
Calculation of taxable income:
Total Income:
= R336 000 + R90 000 + R28 000 + R28 800 + R3 360 + R21 600 + R36 000 + R1 749.40 + R4 200 + R4 300 + R228 - R40 000 + R18 000 + R380 000
= R890 037.40
Less: Deductions (excluding capital loss carry forward):
= R1 800 x 12 + R2 600 + R228 + R4 500
= R22 428
Taxable Income: R890 037.40 - R22 428 = R867 609.40
Calculation of tax liability:
First R195 850 @ 18% = R35 253
Next R305 850 @ 26% = R79 451
On the remainder @ 31% = R10 174.40
Total Tax Liability: R35 253 + R79 451 + R10 174.40 = R124 878.40
Therefore, Phila Siwela's normal tax liability for the year of assessment ended 29 February 2024 is R124 878.40.