Page 373 - SAIT Compendium 2016 Volume2

IN 24 (3) Income Tax acT: InTeRPReTaTIon noTes IN 24 (3)
Example 13 – Simple determination of taxable income of PBO and tax payable
Facts:
A PBO conducts religious PBAs. The resident minister does not occupy the manse and the congregation has let it to a third party at market-related rates for the full year.The following information is re ected in the nancial statements for the year of assessment ended 30 June 2013:
Total receipts and accruals
Donations and tithes from members Bequest
Interest on investment of surplus funds Proceeds from annual fête
Rental income from letting of manse
Total receipts and accruals
Expenditure
PBA expenses
Manse (rates, repairs, garden services) Total expenditure
Result:
Step1 – Determine receipts and accruals exempt from tax Income attributable to PBAs – exempt section 10(1)(cN)(i) Donations and tithes from members
Bequest
Interest on investment of surplus funds
Total receipts and accruals attributable to PBAs
Trading income of an occasional nature – exempt section 10(1)(cN)(ii)(bb) Proceeds from annual fête
Total receipts and accruals exempt from tax
Step 2 – Identify receipts and accruals from other trading activities
Rental income from letting of manse
Total receipts and accruals not exempt from tax that may qualify for the basic exemption
Step 3 – Calculation of basic exemption – section 10(1)(cN)(ii)(dd) The basic exemption is limited to the greater of –
(a) 5% of total receipts and accruals of R1 020 600 = R51 030; or (b) R200 000 Basic exemption is R200 000
R
660 000 40 000 20 000 32 600
268 000
1 020 600
324 000 52 000 376 000
660 000 40 000 20 000
720 000
32 600
752 600
268 000
268 000
Step 4 – Apply basic exemption to receipts and accruals from trading activities that are not exempt
Total receipts and accruals from a trading activity not exempt from tax (step 2) Less: Basic exemption (step 3)
Total receipts and accruals from trading activities subject to tax
R
268 000 (200 000)
68 000
Step 5 – Allocate direct expenditure incurred in respect of taxable trading activities to ‘exempt’ and ‘taxable’ receipts and accruals
Expenditure incurred in the production of receipts and accruals from trading activities must be apportioned between the ‘exempt’ and ‘taxable’ portions using the following formula:
Total receipts and accruals subject to tax Direct expenditure __________________________________ × _____________
Total receipts and accruals from a trading activity 1
Calculate expenditure attributable to taxable portion of rental income:
_68__0_0_0 × _52__0_0_0 = R13 194 268 000 1
Expenditure attributable to ‘taxable’ portion of rental income = R13 194
Step 6 – Determine expenditure attributable to ‘exempt’ portion of rental income
Direct expenditure incurred in the production of rental income
Less: Expenditure attributable to ‘taxable’ portion of rental income (step 5)
Expenditure attributable to ‘exempt’ portion of rental income and not deductible
52 000 (13 194)
38 806
saIT comPendIum oF Tax LegIsLaTIon VoLume 2
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