Question
Daemon Steven is employed by an insurer to sell life insurance policies. He earns a fixed salary of R440 000 a year. He does not
Daemon Steven is employed by an insurer to sell life insurance policies. He earns a fixed salary of R440 000 a year. He does not earn commission. During the 2023 year of assessment, Daemon also earned R400 000 in his spare time as a freelance computer programmer which was part of his business income. He had earned the following additional income for the year of assessment:
| R |
Rental income for a flat on rent | 15 000 p/m |
Interest income on a fixed deposit at a South African bank | 264 600 |
Casino winnings | 150 000 |
Daemon is not a vendor or registered as a micro business and incurred the following expenses during the 2023 year of assessment to promote his computer programming activities, he had the necessary documentation to indicate that these expenses were incurred in the production of his income:
| R |
Annual membership fee at the local squash club | 24 000 |
Drinks and snacks at the club with other members (including Daemons own costs of R4 000) | 21 000 |
Ballpoint pens advertising his computer-programming services, presented to fellow squash players | 3 000 |
Daemon has been conducting his computer programming business from his home since 1 July 2022. His office at home occupies 10% of the total floor area of his home. He also uses the television room (which occupies 5% of the floor area) as an office during the day. Both rooms have been specifically equipped for business purposes.
He incurred the following expenses during the 2023 year of assessment on his home:
| R |
Mortgage bond repayments (R23 000 per month relating to capital repayments) | 40 000 p/m |
Cleaning and maintenance | 60 000 |
New built-in cupboards installed in his office at home | 40 000 |
Electricity, water and rates | 66 000 |
Telephone (80% of its use being for his business). The Commissioner accepts this apportionment as being reasonable in terms of section 23(g) | 17 600 |
Computer equipment purchased on 1 July 2021, which was brought into use immediately. (The acceptable write-off period of the equipment is three years.) | 112 500 |
During the 2023 year of assessment, he incurred legal expenses in connection with:
| R |
The recovery of his trade debtors | 10 000 |
Attempting to recover R5 000 in cash stolen from his computer programming receipts by his assistant during December 2023. She earned R30 000 a month for the two months that she was employed. | 4 000 |
Daemon Steven is 40 years old and he, his wife and his four minor children are members of a registered medical scheme. His wife is a person with a disability as defined. He contributed R6 500 a month to the medical scheme. He also paid qualifying medical expenses of R10 500 that were not reimbursed by the medical scheme. Daemons employer does not make a contribution to his medical aid.
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First, we need to calculate Daemon's taxable income by adding up all his income and subtracting his allowable deductions:
Salary | 440,000 |
---|---|
Business income (freelance computer programmer) | 400,000 |
Rental income for a flat on rent (15,000 x 12) | 180,000 |
Interest income on a fixed deposit | 264,600 |
Casino winnings | 150,000 |
Total income | 1,434,600 |
Annual membership fee at the local squash club | 24,000 |
Drinks and snacks at the club with other members | 21,000 |
Ballpoint pens advertising his computer-programming services | 3,000 |
Home expenses | |
Mortgage bond repayments (R23,000 p/m relating to capital repayments): (23,000 x 12) | 276,000 |
Cleaning and maintenance: | 60,000 |
New built-in cupboards installed in his office at home: | 40,000 |
Electricity, water and rates: | 66,000 |
Telephone (80% of its use being for his business):(80% of R17,600) | 14,080 |
Computer equipment (112,500/3) | 37,500 |
Legal expenses for recovery of trade debtors | 10,000 |
Attempted recovery of stolen cash | 4,000 |
Total deductions | 555,580 |
Total income - Total deductions = Taxable income | 879,020 |
Next, we need to calculate Daemon's tax liability using the tax tables for the 2023 tax year:
2023 tax year (1 March 2022 28 February 2023)
Taxable income (R) Rates of tax (R)
1 226 000 18% of taxable income
226 001 353 100 40 680 + 26% of taxable income above 226 000
353 101 488 700 73 726 + 31% of taxable income above 353 100
488 701 641 400 115 762 + 36% of taxable income above 488 700
641 401 817 600 170 734 + 39% of taxable income above 641 400
817 601 1 731 600 239 452 + 41% of taxable income above 817 600
1 731 601 and above 614 192 + 45% of taxable income above 1 731 600
Question : YOU ARE REQUIRED TO calculate Daemon Stevens tax liability for the 2023 year of assessment.
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