QUESTION 1

Saul (40 years old) is the regional manager for a group of clothing stores. He is married out of community of property and has a fifteen-year-old child. His receipts, benefits and expenses for the 2023 year of assessment are listed below:

Notes R RECEIPTS/BENEFITS

Salary 730 000

Study award 1 11 000

Acquisition of clothing 2 ?

Travel allowance 3 50 000

Use of company cell phone 4 ?

Loan from employer 5 500 000

Long service award 6 ?

Dividends received Foreign unit trusts (not from a tax-free investment) 4 000

Foreign interest received (not from a tax-free investment) 800

Local interest received (not from a tax-free investment) 27 000

EXPENSES Current pension fund contributions 7 30 000

Current retirement annuity fund contributions 7 180 000

Medical expenses 8 33 000

1. Saul completed a post-graduate diploma in marketing at a South African university on 1 November 2022. He passed the one-year course with distinction. On 1 January 2023, Sauls employer paid him R11 000 in recognition of his successful completion of the course. The award covered the academic enrolment fees that he had paid.

2. Subject to certain limits, Sauls employer permits staff to purchase company stock at a 50% retail discount. During the 2023 year of assessment, Saul purchased clothing from his employer for an amount of R3 000. The normal retail price of these items was R6 000. The original cost of the clothing for the employer was R4 000.

3. From 1 April 2022, Saul was required to travel throughout Gauteng on a regular basis, in terms of his contract of employment. He accordingly received a total travel allowance of R50 000 for the period from 1 April 2022 to 28 February 2023. He kept accurate records of business distances travelled but kept no records of costs incurred. The total distance travelled during the period amounted to 8 000 kilometers, of which 2 000 kilometers were for private purposes.

3 CTAX12U/105 QUESTION 1 (continued) Sauls vehicle was purchased at a cost of R210 000 (VAT inclusive) from a motorcar dealer during 2021

. 4. Sauls employer gave him the right to use a company cell phone from 1 July 2022. Saul had the right to use the cell phone, solely for his private purposes, until the end of the 2023 year of assessment. The company purchased the phone at a cost of R7 400 on 1 March 2022. The market value of the cell phone was R6 500 at the time Saul received the right of use.

5. Sauls employer granted him a loan on 1 January 2023 to assist him in purchasing a property. The loan (of R500 000) would be repayable in full at the end of a four-year period, and is subject to interest at a rate of 3% per annum. You may assume that, at 1 January 2023, the repurchase rate was 6.5% and the official interest rate was 7.5%.

6. Saul received a set of golf clubs as an award for his 15 years of unbroken service to his employer. The market value of the clubs amounted to R12 000 and they cost his employer R9 000.

7. Sauls total contributions to a pension fund, from 1 March 2022 until the end of the 2023 year of assessment amounted to R30 000. His employer also paid a total amount of R30 000 to the pension fund on his behalf. Saul also contributed an amount of R180 000 to a retirement annuity fund during the year of assessment. You may assume that Sauls remuneration (as defined in the Fourth Schedule to the Income Tax Act) amounted to R833 400 for the 2023 year of assessment.

8. Saul is a member of a registered medical scheme. His wife and child are registered as his dependents on the scheme. His fifteen-year-old child has a disability as defined. The following are details from Sauls medical scheme statement for the 2023 year of assessment: R Medical scheme contributions for the entire year 26 000 Qualifying medical expenses not re-imbursed by medical scheme and paid by Saul 7 000 Total medical expenses for the year 33 000 In addition to the above medical scheme contributions, Sauls employer also contributed R13 000 to the medical scheme, on his behalf.

Calculate Sauls net normal tax for the year of assessment ended 28 February 2023.