HIGHER EDUCATION PROGRAMMESAcademic Year $2024$Formative Assessment $1($FA$1)$: NQF Level, Credits:Weighting:Assessment Type:Educator:Examiner:January JuneIntroduction to Taxation $($HIT$1181)5,1250\%$Essay QuestionsA. MbendeniA. Mbendeni Due Date: $28$ March $2024$ Total: $100$ Marks Instructions:$1$HIT$1181-$Jan $-$ June $2024-$FA$1-$AM$-$V$3-22012024$ This paper consists of four $(4)$ questions.It is based on units $1-4$ of your textbook.All questions are compulsory.Consult the tax tables provided in Annexures A & B where applicable.Learning outcomes: Calculate tax value, wear and tear and recoupment on sale of a capital asset Calculate taxable lump sum and tax payable Calculate a tax liability as per the sliding scale table Understand the pre$-$paid taxes system Identify amounts that are specifically included in gross income Identify amounts that would be included in the general definition of gross income Calculate limited deduction in terms of S$112$ HIT$1181-$Jan $-$ June $2024-$FA$1-$AM$-$V$3-22012024$Question $1[51$ Marks$]$Blue Vido Pty Ltd $($Blue V$)$ has the following three $(3)$ employees during the tax year of assessment ending $29$ February $2024.$Employee $1$: $18$ marksAndileAndile, $77$ years of age, is a Senior Manager at Blue V$,$ a small$-$medium$-$sized manufacturing company in the center of Durban. He earned a monthly salary of R$32500$ until $31$ December $2023,$ when he decided to retire due to health complications. Andile also received monthly local interest of R$1250$ from his investment and R$70000$ gross dividends from a foreign company. Andile also received R$1000$ monthly commission until $31$ December $2023$ and R$13500$ once$-$off bonus from his employer upon retirement. Andile also received R$3000$ quarterly local dividends.Employee $218$ marksNalediNaledi, $35$ years of age, is working as a Junior Accountant within a small accounting and taxation department. She earns a cash salary of R$26000$ per month. Due to the demand for her position, the company decided to increase her salary by $2\mathrm{.}7\%$ effective from $01$ June $2023.$ Naledi received monthly local interest of R$2000$ from her investment and local dividends amounting to R$13000.$ She earned a bonus of R$17000$ and a monthly commission of R$1000.$ Naledi won R$12500$ from an accounting competition that was held by SAICA on $15$ September $2023.3$ HIT$1181-$Jan $-$ June $2024-$FA$1-$AM$-$V$3-22012024$Employee $315$ marksVuyiswaVuyiswa, $66$ years of age, is working as an Admin Clerk at Petroleum Garage. She earns a monthly salary of R$10000$ and an annual bonus of R$10000.$ Vuyiswa has earned an annual commission of R$8000,$ local dividends of R$19000$ and monthly local interest of R$2000.$ Vuyiswa won R$15000$ in a local modelling competition. Petroleum Garage paid R$2500$ over to SARS as a provisional tax on behalf of Vuyiswa during the current year of assessment.Required:Calculate taxable income for all three $(3)$ employees for the tax assessment year ending $29$ February $2024.$ Briefly explain with reasons where items are not included$/$taxable with applicable sections of the Act. Show all your calculations and round off to the nearest Rand. $4$ HIT$1181-$Jan $-$ June $2024-$FA$1-$AM$-$V$3-22012024$Question $2[31$ Marks$]$During the $2022$ year of assessment, Luyanda resigned and withdrew R$2000000$ from his pension fund. He transferred $50\%$ of this pension fund to a pension preservation fund. During the $2023$ year of assessment, Luyanda received a withdrawal benefit of R$380000$ from the pension preservation fund. During the $2024$ year of assessment, she retired and received a retirement benefit of R$800000.$Required:Calculate the tax payable by Luyanda for the following years of assessment: Show all your calculations$5$HIT$1181-$Jan $-$ June $2024-$FA$1-$AM$-$V$3-22012024$ In the $2022$ year of assessment In the $2023$ year of assessment In the $2024$ year of assessment$7$ marks $11$ marks $13$ marksQuestion $3[12$ Marks$]$Nthabi is the owner of Brown Dee Limited $($BD$).$ BD purchased a delivery vehicle on $1$ March $2021$ for an amount of R$280000.$ BD was entitled to a S$11($e$)$ allowance of $20\%$ p$.$a$,$ on the delivery vehicle.The delivery vehicle was sold on $1$ November $2023$ for an amount of R$300000.$Required:Use the above information to calculate both the tax value and the recoupment for the year ending $29$ February $2024\mathrm{.}6$ HIT$1181-$Jan $-$ June $2024-$FA$1-$AM$-$V$3-22012024$Question $4[6$ Marks$]$Briefly explain your understanding of exempt income and state four $(4)$ types of exempt income provided for by the Income Tax Act$\mathrm{.}7$ HIT$1181-$Jan $-$ June $2024-$FA$1-$AM$-$V$3-22012024$ANNEXURE A:Retirement Lump Sum Benefits$2024$ tax year $(1$ March $202329$ February $2024)$ Taxable income $($R$)155000055000177000077000111550001155001$ and aboveRate of tax$0\%$ of taxable income$18\%$ of taxable income above $55000039600+27\%$ of taxable income above $770000143550+36\%$ of taxable income above $1155000(1$ March $201428$ February $2023)$Taxable income $($R$)150000050000170000070000110500001050001$ and aboveWithdrawal BenefitRate of tax$0\%$ of taxable income$18\%$ of taxable income above $50000036000+27\%$ of taxable income above $700000130500+36\%$ of taxable income above $10500002024$ tax year $(1$ March $202329$ February $2024)$Taxable income $($R$)1275002750172600072600110890001089001$ and aboveRate of tax$0\%$ of taxable income$18\%$ of taxable income above $27500125730+27\%$ of taxable income above $726000223740+36\%$ of taxable income above $10890008$HIT$1181-$Jan $-$ June $2024-$FA$1-$AM$-$V$3-22012024(1$ March $201428$ February $2023)$Taxable income $($R$)12500025001660000660001990000990001$ and aboveRate of tax$0\%$ of taxable income$18\%$ of taxable income above $25000114300+27\%$ of taxable income above $660000203400+36\%$ of taxable income above $990000$ ANNEXURE B:Interest Exemptions $2024$ ratesPerson younger than $65$ R$23800$ Person $65$ and older R$34500$ Interest from a South African source earned by a natural person is exempt, per annum, up to an amount of: $9$ HIT$1181-$Jan $-$