Question 4

Teddy Buthelezi, a budding young entrepreneur from Gqeberha started a new business on 1 March 2022. His turnover (cash receipts) for the year of assessment ended 28 February 2023 amounted to R720 000. His business qualifies as a microbusiness and is registered as such.

As at 28 February 2023, a debtor still owes him an amount of R18 000. On 1 April 2022, he converted his garage into a business premises at a cost of R55 000. The garage made up 15% of the total area of his primary residence. The primary residence was purchased in 2018 for R850 000. After six months in business, the business was flourishing and Teddy needed a bigger place and thus decided to sell the property on 30 September 2022 for R1 300 000. The portion of the proceeds (from the sale of the house) that relate to the converted garage amounted to R220 000.

Teddy also replaced an old oven with a new state-of-the art industrial oven machine. He sold the old oven for R9 000 and made a capital gain of R2 500 on the sale.

Required:

4.1 Determine Teddys turnover tax for the 2023 year of assessment.

Show all workings/calculations

4.2 Should Teddy decide to deregister voluntarily as a micro business, explain the process in terms of paragraphs 9 and 10 of the Sixth Schedule.

4.3 Should Teddys business exceed a turnover of R1 million by the end of December 2022, briefly discuss the process of compulsory deregistration.

Appendix

Turnover tax table: 2023 (1 March 2022 28 February 2023)

Taxable turnover (R) Rate of tax (R)

1 335 000 0% of taxable turnover

335 001 500 000 1% of taxable turnover above 335 000

500 001 750 000 1 650 + 2% of taxable turnover above 500 000

750 001 and above 6 650 + 3% of taxable turnover above 750 000