Question $265$ Marks

Study the scenario and complete the question that follows

You are a junior accountant at a firm of tax practitioners and your manager has asked you to attend to the following email:

Email

From: Harry Ray

RE: Tax assistance

Good day

My name is Harry Ray. I am a resident of the Republic and I am $62$ years old. I have been married to June since $3$ March $1999$ and we are married out of community of property. I worked as a sales manager at Pure and Perfect Pictures $($Pty$)$ Limited $($PPP$)$ from $1$ March $2001$ to $31$ December $2023.$ To my great surprise and delight, I won R$10$ million from the National Lottery in November $2023$ and I immediately decided to make some changes in my life. The first thing I did was that I retired from PPP with effect from $31$ December $2023.$

My employment with PPP

From $1$ March to $31$ December $2023$ my basic salary from PPP was R$40000$ per month and I also earned commission totalling R$255000$ over that period. My December $2023$ payslip shows that, in addition to my normal monthly salary, PPP also paid me R$20000$ as an amount $$in lieu of accumulated leave$$ and a long$-$service award $($for service of more than $20$ years$)$ of R$50000.$ I was also allowed to buy a smart TV from PPP for R$500$ on $31$ December $2023.$ PPP had purchased the smart TV at a cost of R$10000($excluding VAT$)$ and had used the TV in its showroom from $1$ July $2022$ to $31$ December $2023.$ The market value of the TV on $31$ December $2023$ was R$4000($excluding VAT$).$

My December $2023$ payslip shows that PPP withheld employees$$ tax of R$294000$ from $1$ March to $31$ December $2023.$

I was a member of the PPP provident fund since I started working at PPP$.$ One of the conditions of employment was that I had to contribute $6\%$ of my basic salary to the fund every month, and PPP would pay contributions equal to $10\%$ of my basic salary. On my retirement, my total retirement savings in the provident fund amounted to R$3$ million. I decided to take a lump sum of R$1$ million $($which was paid to me on $20$ January $2024)$ and transfer the balance of R$2$ million to a provident preservation fund. All my contributions to the PPP provident fund in previous years qualified for tax deductions, except for the contributions that I made prior to $2017,$ which amounted to R$56000$ and did not qualify for any tax deductions because of the tax law at the time. I have never previously received any other lump sums.

Another condition of my employment contract with PPP was that I had to belong to the PPP Medical Aid Fund. While I was employed by PPP$,$ they paid all the contributions to the fund. Between $1$ March and $31$ December $2023$ these contributions were R$7000$ per month, which covered me as the main member, and June and my daughter Amy, as my dependants. Amy turned $21$ in November $2023,$ and she completed her full$-$time studies at Eduvos at the end of December $2023$ academic year. She began working in a full$-$time job from $1$ January $2024$ and joined her employer$$s medical aid from that date. June and I joined the Discovery Medical Aid Fund from $1$ January $2024$ and since that date I have paid contributions of R$8000$ per month for the two of us$.$ During the year ended $29$ February $2024$ I paid qualifying medical expenses of R$29750,$ of which R$8250$ was reimbursed by the medical aid fund.

My houses $$ old and new

My second big decision was to sell my house, which June and I have owned and lived in since $2003.$ We purchased the house in our joint names for R$1200000$ and spent another R$600000$ on improvements to the property between $2003$ and $2019.$ We sold the house for R$5$ million on $15$ February $2024.$ We had to pay R$320000$ commission to the estate agent. We also had to pay R$325000$ to FNB to settle the outstanding balance on the bond on the property.My third big decision was to use the remaining proceeds from the sale of our house, together with some of my provident fund lump sum and my lottery winnings, to purchase a new house in Cape Town. We bought the house for R$7$ million on $28$ February $2024,$ and we plan to move in on $1$ July $2024.$My investments:During the year, I invested any surplus cash in a special savings account with my bank and I earned interest of R$142169$ for the year ended $29$ February $2024.$While I was employed by PPP$,$ I was allowed to take an interest$-$free staff loan of R$100000.$ I took out the loan in $2016$ and purchased some shares in local companies listed on the JSE, and in some foreign companies whose shares are listed on both the New York Stock Exchange and the JSE. During the year ended $29$ February $2024$ I earned, from the shares in this portfolio, local dividends of R$18500$ and foreign dividends of R$15200($I translated the foreign amount to Rands using the exchange rate from the SARS website$).$ I have not sold any of the shares, but I used some of my lottery winnings to repay the outstanding balance on the loan on $31$ December $2023.$My tax question.I would like to finalise my tax affairs before I move to Cape Town, so that I can know exactly how much cash I will have l left.