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IN 25 (3) Income Tax acT: InTeRPReTaTIon noTes IN 26
Separate tax returns are required to be submitted for both periods of assessment when a person is declared insolvent.* The effect of the setting aside of an order of sequestration is to terminate the existence of the insolvent estate ab initio. The setting aside of the order of sequestration will mean that the rst requirement of the physical presence test, namely, more than 91 days in the current year of assessment, will be determined in relation to the full year of assessment, that is, from the rst day of March to the last day of February the following year.
5. Conclusion
In the event of death or sequestration, the rst requirement of the physical presence test (namely, physical presence exceeding 91 days in total for the current year of assessment) is applied in the normal way, notwithstanding that the year of assessment is for a period covering less than a full calendar year. The rst requirement is therefore not scaled down to account for the fact that the ‘year of assessment’ is less than a full year. An insolvent person will be assessed as a natural person for the period before insolvency, as well as for the period subsequent to insolvency, should any income accrue to that person in his or her personal capacity. The physical presence test must be applied to each of these two periods of assessment. The rst period will be regarded as an immediately preceding year of assessment in relation to the second period.
Income Tax Interpretation Note 26
The Taxation of CCMA and Labour Court Awards to employees and former employees
DATE: ACT: SECTION:
SUBJECT:
1. Purpose
30 March 2004
INCOME TAX ACT 58 of 1962 (the Income Tax Act)
Section 1 de nition of ‘gross income’, paragraph (c), paragraph (d), and paragraph (f) Section 10 (1) (x)
Section 7A (4A)
The Taxation of CCMA and Labour Court Awards to employees and former employees
The purpose of this interpretation note is to provide guidelines on the taxability of CCMA and Labour Court awards to employees and former employees, arising from the application of labour law. Labour law may be described as the regulation of the rendering of services by means of common law, statutory measures, as well as case law.
2. Background
Various Dispute Resolution Mechanisms:
2.1 The Commission for Conciliation, Mediation and Arbitration
The main function of the Commission for Conciliation, Mediation and Arbitration (CCMA) is to attempt to conciliate and, if conciliation fails, to take steps to arbitrate such disputes. The CCMA will only have jurisdiction to arbitrate a dispute if a matter is referred to it by a party to a dispute and if the Labour Relations Act, 1995 allows for the arbitration. Even where the Labour Relations Act, 1995 provides for the Labour Court to arbitrate, the CCMA is obliged to arbitrate the matter if all the parties to a dispute request the CCMA to arbitrate. Some examples of the matters that may be arbitrated by the CCMA in accordance with the Labour Relations Act, 1995 are:
• disputes about certain unfair dismissals;
• certain residual unfair labour practices;
• application for the removal of a member of a workplace from of ce.
• disputes concerning the interpretation and application of the Labour Relations Act, 1995 concerning workplace
forums;
• disputes of mutual interest;
• disputes concerning disclosure of information;
• disputes concerning organisational rights;
• disputes in essential services when parties are not allowed to strike, or lock out; and
• where parties fail to agree on matters of joint decision-making at work-place forums.
2.2 The Labour Court
The Labour Court of South Africa has similar authority and powers to those of a high court in relation to matters that fall under its jurisdiction. It has exclusive jurisdiction in respect of all matters provided for in the Labour Relations Act, 1995, or where any other Act of parliament gives it jurisdiction. Examples of matters in which the Labour Court has exclusive jurisdiction are:
• the review of arbitration awards of the CCMA;
• automatically unfair dismissals;
• dismissals for operational reasons;
• dismissals owing from strikes or closed shop agreements; and • unfair labour practice disputes concerning discrimination.
2.3 The Labour Appeal Court
* Proviso (b) to section 66(13)(a) read with section 25 of the Tax Administration Act No. 28 of 2011
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