Page 397 - SAIT Compendium 2016 Volume2

IN 29 (2) Income Tax acT: InTeRPReTaTIon noTes IN 29 (2)
The Act does not make provision for the apportionment of the actual contributions; apportionment may therefore be made to income that is not in uenced by the formula rst and thereafter to those affected by the formula, the excess farming income being the portion of farming income that exceeds the average taxable income from farming.
Result:
“D” in the example is therefore determined as follows: 15% × R300 000 (Average taxable farming income) 15% × R160 000 (Taxable interest)
R
45 000 24 000 69 000
The portion of contributions affected by the formula is equal to R150 000 (allowable contributions) less R69 000. Symbol "D" is, therefore, equal to R81 000. Effectively, the R81 000 represents the portion that was allowed as a deduction solely by inclusion in taxable income of special remuneration and actual taxable farming income (as opposed to the average farming income).
Example 3 – Equalised rates
Facts:
G carried on farming operations and elected that the provisions of paragraph 19 be applied. She is 65 years of age. Her taxable income from farming operations for the current year (year 5) and for the four previous years of assessment were as follows:
Taxable income or assessed loss from farming
Year 1 Year 2 Year 3 Year 4 Year 5
R
600 000 500 000 70 000 (50 000) 400 000 1 520 000
The taxable income from farming in year 5 excludes the loss incurred in year 4. The average taxable income from farming for purposes of year 5 is therefore R304 000 (R1 520 000 / 5).
During the current year of assessment (year 5) she derived taxable income from the following sources:
Source
Taxable farming income
Taxable interest
Pension
Taxable income before deductions
The following deductions were incurred:
Deductions
Retirement annuity fund contributions Medical expenses
Total allowable deductions
She has not incurred any capital development expenditure that will be allowable against taxable farming income during the current year or previous year of assessment.
R
400 000 100 000 120 000 620 000
R
90 000
30 000
120 000
saIT comPendIum oF Tax LegIsLaTIon VoLume 2
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