QUESTION 4 (24 MARKS) PARTA (19 Marks) Metro in Bloemfontein made William, aged 45, an employment offer on 15" January 2017. Should he decide to take the offer he will commence duties on 14 March 2017. His remuneration allows him to restructure his remuneration package. William is entitled to a gross annual salary of R280 000 or to a remuneration package, which is structured as follows: A salary of R14 000 a month. Free accommodation in a house consisting of 6 rooms, which is owned by Metro. Electricity, water and furniture will not be supplied. William is at present paying R3 000 per month for the flat in which he lives. His remuneration proxy is R190 000 A travelling allowance of R6 000 per month. He will buy a vehicle with a cash value of R123 120 (including VAT of 14%). This vehicle will be acquired on 19 March 2017 William has confirmed that he will keep records of all his business trips. He estimates the costs to travel 35 000 km will amount to R44 500 (being R38500 for fuel, R5000 maintenance and R1000 licences). These costs excludes the lease payments. He will elect the actual costs basis on calculating the benefit Johan has estimated the following for the 2018 year of assessment: Business km 24 000 Private km 11 000 REQUIRED: A normal tax calculation based on the two options for the 2018 year of assessment and An after tax monthly income based on the two options for the 2018 year of assessment You may assume that Metro will deduct PAYE on the full motor vehicle benefit (not reduced to 80%). PART B (5 Marks) The following statements refer to the taxation on individuals and fringe benefits. Indicate which of the following statements are TRUE or FALSE. 1. Amounts paid to reimburse the actual expenses incurred by an employee, will form part of remuneration 2. In all cases, assets given to employees by employers are included in the employee's gross income at market value. 3. The employers contribution towards a pension fund is regarded a fringe benefit in the hands of the employee 4. In a partial period of assessment, the tax rebate of R13 635 should be reduced accordingly. 5. When a SA resident holds a shareholding of more than 10% of equity shares and voting rights in a foreign company, the dividends received will be exempted in full. RATES OF TAX FOR INDIVIDUALS 2017 tax year (1 March 2016 - 28 February 2017) Taxable income (R) Rates of tax (R) 0 -188 000 18% of taxable income 188 001 - 293 600 33 840 + 26% of taxable income above 188 000 293 601 - 406 400 61 296 +31% of taxable income above 293 600 406 401 - 550 100 96 264 + 36% of taxable income above 406 400 550 101 - 701 300 147 996 + 39% of taxable income above 550 100 701 301 and above 206 964 +41% of taxable income above 701 300 * Note: Parliament is processing tax legislation that will change the current amount of 61 260 to 61 296 later in 2017 2018 tax year (1 March 2017 - 28 February 2018) Taxable income (R) Rates of tax (R) 0 - 189 880 18% of taxable income 189 881 - 296 540 34 178 +26% of taxable income above 189 880 296 541 - 410 460 61 910 +31% of taxable income above 296 540 410 461-555 600 97 225 + 36% of taxable income above 410 460 555 601 - 708 310 149 475 + 39% of taxable income above 555 600 708 311 -1 500 000 209 032 + 41% of taxable income above 708 310 1 500 001 and above 533 625 + 45% of taxable income above 1 500 000 Tax Rebates Tax Rebate Primary Secondary (65 and older) Tertiary (75 and older) 2018 R13 635 R7 479 R2 493 2017 R13 500 R7 407 R2 466 Tax Year 2016 R13 257 R7 407 R2 466 2015 R12 726 R7 110 R2 367 2014 R12 080 R6 750 R2 250 Tax Thresholds Tax Year Person 2018 2017 2016 2015 Under 65 R75 750 R75 000 R73 650 R70 700 65 an older R117 300 R116 150 R114 800 R110 200 75 and older R131 150 R129 850 R128 500 R123 350 Section 1.01 Interest Exemptions - no changes from last year Interest from a South African source earned by a natural person is exempt, per annum, up to an amount of: 2014 R67 111 R104 611 R117 111 Person younger than 65 Person 65 and older 2018 R23 800 R34 500 2017 R23 800 R34 500 2016 R23 800 R34 500 2015 R23 800 R34 500 2014 R23 800 R34 500 QUESTION 4 (24 MARKS) PARTA (19 Marks) Metro in Bloemfontein made William, aged 45, an employment offer on 15" January 2017. Should he decide to take the offer he will commence duties on 14 March 2017. His remuneration allows him to restructure his remuneration package. William is entitled to a gross annual salary of R280 000 or to a remuneration package, which is structured as follows: A salary of R14 000 a month. Free accommodation in a house consisting of 6 rooms, which is owned by Metro. Electricity, water and furniture will not be supplied. William is at present paying R3 000 per month for the flat in which he lives. His remuneration proxy is R190 000 A travelling allowance of R6 000 per month. He will buy a vehicle with a cash value of R123 120 (including VAT of 14%). This vehicle will be acquired on 19 March 2017 William has confirmed that he will keep records of all his business trips. He estimates the costs to travel 35 000 km will amount to R44 500 (being R38500 for fuel, R5000 maintenance and R1000 licences). These costs excludes the lease payments. He will elect the actual costs basis on calculating the benefit Johan has estimated the following for the 2018 year of assessment: Business km 24 000 Private km 11 000 REQUIRED: A normal tax calculation based on the two options for the 2018 year of assessment and An after tax monthly income based on the two options for the 2018 year of assessment You may assume that Metro will deduct PAYE on the full motor vehicle benefit (not reduced to 80%). PART B (5 Marks) The following statements refer to the taxation on individuals and fringe benefits. Indicate which of the following statements are TRUE or FALSE. 1. Amounts paid to reimburse the actual expenses incurred by an employee, will form part of remuneration 2. In all cases, assets given to employees by employers are included in the employee's gross income at market value. 3. The employers contribution towards a pension fund is regarded a fringe benefit in the hands of the employee 4. In a partial period of assessment, the tax rebate of R13 635 should be reduced accordingly. 5. When a SA resident holds a shareholding of more than 10% of equity shares and voting rights in a foreign company, the dividends received will be exempted in full. RATES OF TAX FOR INDIVIDUALS 2017 tax year (1 March 2016 - 28 February 2017) Taxable income (R) Rates of tax (R) 0 -188 000 18% of taxable income 188 001 - 293 600 33 840 + 26% of taxable income above 188 000 293 601 - 406 400 61 296 +31% of taxable income above 293 600 406 401 - 550 100 96 264 + 36% of taxable income above 406 400 550 101 - 701 300 147 996 + 39% of taxable income above 550 100 701 301 and above 206 964 +41% of taxable income above 701 300 * Note: Parliament is processing tax legislation that will change the current amount of 61 260 to 61 296 later in 2017 2018 tax year (1 March 2017 - 28 February 2018) Taxable income (R) Rates of tax (R) 0 - 189 880 18% of taxable income 189 881 - 296 540 34 178 +26% of taxable income above 189 880 296 541 - 410 460 61 910 +31% of taxable income above 296 540 410 461-555 600 97 225 + 36% of taxable income above 410 460 555 601 - 708 310 149 475 + 39% of taxable income above 555 600 708 311 -1 500 000 209 032 + 41% of taxable income above 708 310 1 500 001 and above 533 625 + 45% of taxable income above 1 500 000 Tax Rebates Tax Rebate Primary Secondary (65 and older) Tertiary (75 and older) 2018 R13 635 R7 479 R2 493 2017 R13 500 R7 407 R2 466 Tax Year 2016 R13 257 R7 407 R2 466 2015 R12 726 R7 110 R2 367 2014 R12 080 R6 750 R2 250 Tax Thresholds Tax Year Person 2018 2017 2016 2015 Under 65 R75 750 R75 000 R73 650 R70 700 65 an older R117 300 R116 150 R114 800 R110 200 75 and older R131 150 R129 850 R128 500 R123 350 Section 1.01 Interest Exemptions - no changes from last year Interest from a South African source earned by a natural person is exempt, per annum, up to an amount of: 2014 R67 111 R104 611 R117 111 Person younger than 65 Person 65 and older 2018 R23 800 R34 500 2017 R23 800 R34 500 2016 R23 800 R34 500 2015 R23 800 R34 500 2014 R23 800 R34 500