Page 399 - SAIT Compendium 2016 Volume2

IN 29 (2)
Income Tax acT: InTeRPReTaTIon noTes
IN 29 (2)
Normal tax payable Less: Primary rebate
Secondary rebate (65 and older) Normal tax liability
Example 4 – Equalised rates
Facts:
R
125 649,95 (11 440,00) (6 390,00) 107 819,95
X, aged 61, is a livestock farmer. During the 2013 year of assessment, he had a taxable farming income of R250 000. X also receives a living annuity of R150 000 a year. In addition to these two incomes, he received R20 000 taxable interest (after exemptions) from a local bank, on a xed deposit. X also contributed R65 000 to an RAF.
X’s taxable income from farming for the previous four years of assessment, was as follows:
Year of assessment
2013 2012 2011 2010 2009 Total
Taxable farming income
R 250 000
26 000
18 500 (10 500) 33 000 317 000
X has yet to decide on making a paragraph 19 election. For the 2013 year of assessment: (a) Determine the net normal tax due by X should he not elect paragraph 19.
(b) Determine the net normal tax due by X should he elect paragraph 19.
Result (a):
Taxable farming income Other income: Annuity Taxable interest
Income
Less: RAF contributions limited to 15% of R420 000 Taxable income*
Normal tax on R357 000
Less: Primary rebate
Net normal tax
Result (b):
Average farming income for current and 4 preceding years: R317 000 / 5 = R63 400
Step 1
Determine the values of symbols "B" and "C"
"B" = Taxable income
= R357 000*
"C" = Excess of current farming income over average farming income:
R250 000 – R63 400 = R186 600
R 250 000 150 000
20 000 420 000 (63 000) 357 000 83 950 (11 440) 72 510
saIT comPendIum oF Tax LegIsLaTIon VoLume 2
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