Page 374 - SAIT Compendium 2016 Volume2

IN 24 (3) Income Tax acT: InTeRPReTaTIon noTes
Step 7 – Calculate taxable income
Total receipts and accruals not exempt (step 2) Less: Exempt portion (step 3)
Total receipts and accruals subject to tax (step 4) Less: Allowable expenditure (step 5)
Taxable income
Step 8 – Calculate income tax payable
Taxable income R54 806 at 28% (2012/2013)
Income tax payable
Example 14 – Advanced determination of taxable income of PBO and tax payable
IN 24 (3)
268 000 (200 000) 68 000
(13 194)
54 806 15 346
Facts:
A non-pro t company incorporated under the Companies Act, 2008, conducts a PBA of caring for abandoned children. The PBO sells Christmas cards reconditioned by volunteers, operates a bookshop in a shopping mall and holds a concert as a special fundraising event, to supplement its income. Royalty income was received as a distribution from a trust in accordance with section 25B(2).
The following receipts and expenditure are re ected for the year of assessment ending 30 November 2013:
Total receipts and accruals
Donations
Government subsidy
Grants
Interest on investments
Bookshop sales
Royalties – distribution from trust Sale of Christmas cards
Sale of concert tickets
Total receipts and accruals
Expenditure
PBA expenses (direct expenditure)
Bookshop trading expenses (direct expenditure) Accounting fees (general (indirect) expenditure) Total expenditure
R 165 000 1 100 000 550 000 18 000 227 400 132 600 4 000 13 000 2 210 000
724 000 48 000 16 900
788 900
Note: No portion of the general (indirect) expenditure has been incurred in the production of the investment income
or the royalty income.
Result:
Step 1 – Determine receipts and accruals exempt from tax Income attributable to PBAs – exempt section 10(1)(cN)(i)
Donations
Government subsidy
Grants
Interest on investments
Total receipts and accruals attributable to PBAs
Trading income of an occasional nature – exempt section 10(1)(cN)(ii)(bb) Sale of Christmas cards
Sale of concert tickets
Total receipts and accruals exempt from tax
Total receipts and accruals exempt from income tax
Step 2 – Identify receipts and accruals from other trading activities R Bookshop sales
Royalties
Total trading receipts and accruals not exempt from income tax
that may qualify for the basic exemption
R
165 000 1 100 000 550 000 18 000 1 833 000
4 000 13 000 17 000
1 850 000
227 400 132 600
360 000
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 R2 210 000 = R110 500; or (b) R200 000 Basic exemption is R200 000
366 saIT comPendIum oF Tax LegIsLaTIon VoLume 2