QUESTION 4 (10 MARKS)
You own your own taxation and business consulting firm and Mr. Kerneelsie (age 61) one of your new clients approached you for advice on receipts and accruals that were paid and that accrued to him during the 2018 year of assessment. Mr. Kerneelsie have some knowledge of income tax, but he is unsure about some of the amounts that accrued to him in 2018. He approached your firm with matters that he needs clarity with. Please answer the specific questions drafted by Mr. Kerneelsie.
The following receipts and accruals were paid and accrued to Mr. Kerneelsie
|Unemployment Insurance Fund (UIF) received||25 000|
|Interest received from a local Post Office||34 000|
|Dividends from a company in Namibia||25 000|
|Uniform Allowance||10 000|
- The previous employer of Mr. Kerneelsie became bankrupt and dissolved the company and Mr. Kerneelsie lost his job. During the 2 months at home and seeking employment UIF payments of R25 000 were received. Mr. Kerneelsie could land a job in the third month where he is currently employed as a mine worker at Ashanti Gold.
- The interest received from the local Post Office relates to an investment made on 1 August 2017. This is the first interest payment made received from the local Post Office.
- Mr. Kerneelsie holds a 15% interest in the Namibian company.
- Mr. Kerneelsie got divorced from his ex- wife in 2014 and receives alimony from his ex-wife of R40 000 per annum as part of their divorce agreement.
- Mr. Kerneelise purchased an annuity of R2000 per month for himself, for which he paid an amount of R200 000. The annuity is paid from 1 March 2017 and it will be paid to him for 11 years.
- Mr. Kerneelsie is employed from 30 November 2017 at Ashanti Gold mine and received the unform allowance to buy safety boots, helmets and sharp green overalls that he will wear every day when he enters the main gate of the mine. In terms of the labour law all mine workers are required to wear safety gear when working in the mine.
- Under which circumstances will Unemployment Insurance Fund benefits received be exempted for income tax? (1)
- What is the amount (if any) of interest (note 2 above), that will be exempted for income tax for the 2018 year of assessment? (1)
- List the requirement to be met for a foreign dividend to be exempted from Income Tax. (1)
- Alimony received from an ex-spouse will be exempted if the divorce took place before a specific date. Provide the correct date. (1)
- Calculate the capital portion of the annuity to be exempted for the 2018 year of assessment. (3)
- List two requirements to be met for a uniform allowance to be exempted from Income Tax. Provide whether the uniform allowance of R10 000 received will be exempted for tax purposes. (3)
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