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VIDEO TO WATCH:
Part 1
INDIVIDUALS
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COPYRIGHT NOTICE
Copyright © CA Campus
These notes enjoy copyright under the Berne Convention. In terms of the Copyright Act, no 98 of 1978, no part of this
material may be reprinted or reproduced, in any form whatsoever, either in whole or in part or by any electronic or
other means including the making of photocopies thereof, without the express prior written consent of the proprietor,
CA Campus.
No individual may share any CA Campus content or material with any other person.
The proprietor will not hesitate to prosecute any such offenders to the fullest extent of the law and to report their
details to:
• UNISA
• The South African Institute of Chartered Accountants (SAICA) for purposes of barring such persons from registering
as chartered accountants (SA), as such actions constitute a gross transgression of ethical principles, which is a
violation of the code of professional conduct of SAICA
• South African Police Service
• Any other relevant professional body / organisation including any employer
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TAX FRAMEWORK
• You MUST follow the TAX FRAMEWORK
when calculating an individual’s taxable
income.
• In tests/exams you may be marked
negatively if you don’t follow it.
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VIDEO TO WATCH:
INTRODUCTION Part 2
• When studying the income tax for individuals it is important to
understand that the majority of the sections that you have studied so far
are equally applicable to individuals and other taxpayers (i.e. companies)
• We will focus on sections which are unique to individuals
• Pay attention to the sections relating to deductions and exemptions as
some of these sections are only applicable to natural persons
• One of the most important sections to keep in mind when calculating the
taxable income of an individual is s23(m).
• Students often neglect this section and lose easy marks.
• If you understand s23(m), it’s impossible to catch you out when it comes to
deductions
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s23(m)
• s23(m) does NOT apply if the natural persons earns MOSTLY (greater than 50%) commission
• In other words, a person that earns mostly commission is not restricted by s23(m) and may be able to claim
deductions that a ‘salary-earner’ cannot.
• A person that earns mainly a salary may thus only claim the following deductions IN RELATION TO THAT
EMPLOYMENT:
• Retirement fund deductions (s11F)
• Legal cost, wear and tear, bad debts and provision for doubtful debts
• A deduction for any amounts the taxpayer paid back to the employer (i.e. paying back salary, paying back a restraint
of trade)
• Home office expenses that are not disallowed in terms of s23(b)
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VIDEO TO WATCH:
RETIREMENT DEDUCTIONS (s11F) Part 3
• This section has changed radically over the past few years and has been
amended several times.
• This section allows individuals to claim a tax deduction for contributions
made to retirement funds such as pension funds, provident funds and
retirement annuity funds (RAFs)
• IMPORTANT: This deduction is done AFTER the inclusion of the taxable
capital gain per s26A
• Note: Make sure you know the framework we will use. The s11F deduction relies
on the calculation of certain sub-totals
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sections 6quat(1C) and 18A; and
and sections 6quat(1C) and 18A; and
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s11F
Per the para1
definition in the
RETIREMENT DEDUCTION
Fourth Schedule
R350 000
Remuneration
Lesser of 27.5% x Greater of
Taxable Income
Taxable income (incl CGT)
(excl CGT)
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REMUNERATION (para1 of 4th SCHEDULE) LECTURE EXAMPLE 1
• The most important/common items of remuneration:
• salary, leave pay, wages, overtime, bonus, commission
• any annuities received (per para (a) of gross income definition)
• any annuity including amounts received from pension fund, provident fund, RAF
• any restraint of trade payment received
• any fringe benefit (but see travel allowance and company car rules below)
• subsistence allowance
• a subsistence allowance is NOT subject to employees tax unless
• it was received and by the last day of the next month it has not been used and has not been repaid by
the employee
• 80% of any travel allowance received
• If employer is satisfied that at least 80% of the use of the motor vehicle will be for business purposes
then the remuneration is 20% of travel allowance
• 80% of the company car fringe benefit
• If employer is satisfied that at least 80% of the use of the motor vehicle will be for business purposes
then the remuneration is 20% of fringe benefit
• any gains in terms of s8B and s8C
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PAST CONTRIBUTIONS DISALLOWED
• Contributions that exceeded the allowable deduction in the past may be
carried forward to the next year and treated as contribution made in that year
• However, the contributions from the past year that were disallowed must be
applied in the following order:
1. Against any lump sum (para 5(1)(a) or para 6(1)(b)(i) of 2nd Schedule)
2. Against any annuities per s10C
3. Last, as part of s11F
• SPECIAL NOTE on excess contributions carried forward from BEFORE 2016
• Only pension fund and RAF contributions disallowed before 1 March 2016 may be
considered for s11F
• Provident fund contributions before 2016 may NOT be considered for s11F
• This is because previously provident fund was not allowed as a deduction. Those past contributions
cannot now be allowed.
• Past contributions to provident funds (before 2018) will thus be deducted against the lump sum or
annuities (s10C)
• Provident fund contributions not allowed from 2018 onwards will be allowed as a deduction
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VIDEO TO WATCH:
Part 4
REBATES FROM NORMAL TAX
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REBATES LECTURE EXAMPLE 2
• All natural persons are entitled to a rebate(s) from the normal tax calculated
per the tax tables
• These rebates are amounts that reduce the tax payable
• These rebates are NOT deductions against taxable income
• The rebates can be found in s6 of the Act
Gross Income, Exempt Income, Deductions, etc. xxx
NOT here
Taxable Income xxx
What about apportionment?
The rebates are only apportioned under the
Tax per Tables xxx following situations:
Less: Rebates (s6) Here! • death
• birth
• Primary (for everyone) (x) • insolvency
• Secondary (65 or older) (x)
There is no apportionment for working less than a
• Tertiary (75 or older) (x) full year (i.e. when a person starts working for the
Net normal Tax xxx first time, or when a person resigns or retires).
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VIDEO TO WATCH:
Part 5
MEDICAL REBATES
s6A and s6B
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INTRODUCTION
• Natural persons are allowed to claim medical tax credits against their tax
payable.
• There are two medical tax credits available:
• s6A: Medical scheme fees tax credit
• Only available if contributing to medical aids.
• s6B: Additional medical expenses tax credit
• Available to everyone who had medical expenditure (including medical aid contributions)
Gross Income, Exempt Income, Deductions, etc. xxx
NOT here
Taxable Income xxx
Tax per Tables xxx
Less: Rebates (s6)
Less: s6A and s6B medical tax credits Here! (x)
Net normal Tax xxx
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s6A(2)(b): MEDICAL SCHEME FEES TAX CREDIT
• In order to claim the s6A medical tax credit:
• The taxpayer (or dependant) needs to be a member of a medical aid and
• Payment must have been made to the medical aid (by either taxpayer or employer)
• The amount of s6A medical scheme fees tax credit that a taxpayer qualifies for
depends on the amount of dependants for whom the taxpayer is paying medical aid
contributions.
• For these amounts, refer to s6A – it is updated yearly Refer to the “Tax Rates and Tax Tables”
document on student platform for rates
used in lecture examples.
Refer latest SAICA Student Handbook
SIMPLE EXAMPLE OF PRINCIPLE:
Assume that the s6A medical scheme fees credit prescribed in the Act is:
- R300 for the taxpayer and an additional R300 for one dependant AND
- R200 for each additional dependant
Assume the taxpayer contributed to a medical aid for himself and 3 dependants for 8
months during the year of assessment. The s6A for the year would be:
(R300 + R300 + R200 + R200) x 8months = xxx
NOTE:
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The s6A credit amounts used in this example are NOT Only used for illustration of the principle
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s6A: MEDICAL SCHEME FEES TAX CREDIT
• A taxpayer can also qualify for s6A if the medical aid contributions were paid
by
• The taxpayer’s deceased estate AND/OR
• The taxpayer’s employer (usually a fringe benefit)
• Remember to include the fringe benefit value in the taxpayer’s gross income, if required.
• A ‘dependant’ for s6A is:
• spouse, child, other members of the immediate family of the taxpayer who the taxpayer
is liable for family care OR
• any other person that is allowed as a dependent by the taxpayer’s medical aid
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s6B: ADDITIONAL MEDICAL EXPENSES TAX CREDIT
• Taxpayer qualify for s6B if they incurred any “qualifying medical expenses”
and/or contributions to a medical aid
• IMPORTANT: Taxpayers who do not belong to a medical aid do not qualify for s6A, but will
still qualify for s6B.
• Qualifying medical expenses are amounts paid by taxpayer during the year of
assessment to any duly registered:
• Medical practitioner, dentist, optometrist, homeopath, physiotherapist, etc
• Nursing homes, hospital, nurses, midwives, nursing assistants, etc
• Pharmacies for prescription medicine
• The idea is that if it is a medical expenditure incurred in respect of a registered
medical professional/service, it would be allowed.
• Not allowed, for example, for informal traditional healers who are not registered medical
professionals
• Any amount recovered from a medical aid does NOT qualify as a qualifying
medical expense
• In other words, if the medical aid reimbursed a taxpayer for a cost incurred, then the
taxpayer cannot claim a tax deduction.
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TYPES OF TAXPAYERS FOR s6B
TAXPAYER TYPES
Taxpayers 65 or older
(s6B(3)(a))
Calculated in the same manner
Taxpayer with
disabilities (s6B(3)(b))
All other taxpayers
(s6B(3)(c))
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TAXPAYER 65 OR OLDER AND/OR TAXPAYER WITH
DISABILITY
Medical Aid Contributions xxx
Less: 3 x s6A (xxx)
Cannot be
xxx x 33.3% xxx a negative
amount
Plus: Qualifying medical expenses xxx x 33.3% xxx
Total s6B xxx
Taxpayers can use this formula to calculate s6B if:
• Taxpayer qualifies for the s6(2)(b) rebate [65 or older] OR
• Taxpayer, taxpayer’s spouse or child has a disability
Make sure to pay attention to which taxpayers’ disabilities are considered.
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ALL OTHER TAXPAYERS (i.e. YOUNGER THAN 65, NO
DISABILITIES) LECTURE EXAMPLE 3
Medical Aid Contributions xxx
Less: 4 x s6A (xxx)
Cannot be
xxx a negative
amount
Plus: Qualifying medical expenses xxx
xxx
Less: 7.5% of Taxable Income (xxx)
Cannot be
a negative xxx x 25% xxx
amount
Total s6B xxx
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VIDEO TO WATCH:
Part 6
MARRIAGE IN COMMUNITY OF
PROPERTY
s7(2A) and (2C)
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s7(2A)
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MARRIED IN COMMUNITY OF PROPERTY
• Per s7(2A) if taxpayers are married and they carry on a trade together then the
income from the trade must be split according to their shares in the business
• Any income from the carrying on of a trade that is only carried on by one of the
spouses is NOT split
• REMEMBER: The definition of ‘trade’ includes salary
• s7(2A) specifically excludes the letting of fixed property from a trade (but it does form part
of the definition of ‘trade’ in s1)
• Income from the letting of fixed property must be split 50/50 between spouses
• Income that is not from a trade (such as dividend income, interest income)
must be split 50/50 between spouses
• The above principles also apply to any capital gains that may arise on the
disposal of assets
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s7(2C): ITEMS DEEMED TO BE TRADE LECTURE EXAMPLE 4
• The following income is deemed to be from the carrying on of a trade by a spouse. It
is thus NOT split 50/50 by s7(2A):
• retirement amounts earned (lump sums and monthly amounts), annuities, income such as
royalties from patents, designs or copyrights
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