Page 499 - SAIT Compendium 2016 Volume2

IN 53 (2) Income Tax acT: InTeRPReTaTIon noTes IN 53 (2)
Annexure – Examples
Example 1 – Operating lease
Facts:
X and Y enter into a partnership. The partnership purchases an aircraft which is brought into use in the rst year of assessment. The partnership enters into a lease agreement with a charterer who hires it out to the general public.
Result:
The lease is not an operating lease since the aircraft is not hired by the general public directly from the owner of the aircraft. Accordingly, the limitation under section 23Aapplies
Example 2 – Limitation of allowances on affected assets
Facts:
Company A purchases two used manufacturing machines in year 1 and lets these from date of purchase. The following information relates to these machines for the rst and second years of assessment:
Cost
Rent received
Interest payable
Machine A Machine B RR
Year 1 Year 2 Year 1 Year 2
600 000 200 000 180 000 72 000 75 000 120 000 R
(272 000) (186 800)
(357 200) (139 000)
760 000 150 000 120 000 91 200 86 000 152 000 R
350 000
(163 200) 186 800
(186 800) Nil
300 000 (161 000) 139 000
(139 000) Nil
Section 12C allowance (20%) Result:
Year 1
Rental income from affected assets (R200 000 + R150 000) Less: Allowable deductions – interest (R72 000 + R91 200)
Net rental income
Less: Allowances – section 12C (R120 000 + R152 000)
Limited to net rental income [section 23A(2)]
Taxable income
Year 2
Rental income from affected assets (R180 000 + R120 000) Less: Allowable deductions – interest (R75 000 + R86 000) Net rental income
Less: Allowances – section 12C (R272 000 + R85 200) Limited to net rental income [section 23A(2)]
Taxable income
Amount disallowed under section 23A(4) and carried forward to the succeeding year of assessment (R357 200 – R139 000) 218 200
Example 3 – Determination of carry-forward amounts on disposal of asset
Facts:
Company X owns a single aircraft which it acquired in year 1 at a cost of R100 000. The aircraft was let for a period of three years before being sold at the end of year3.
Company X’s net rental income from letting the aircraft before capital allowances was as follows:
R
1 000 5 000
12 000
The aircraft quali ed for the allowance under section 12C at the rate of 20% ayear.
Determine–
• the section 12C allowances to which Company X is entitled in years 1 to 3;
• the allowances to be carried forward at the end of years 1 to 3; and
• the section 11(o) allowance or recoupment under section 8(4)(a) that arises in year 3 assuming that the aircraft was
sold for R90 000 [scenario 1] or R80 000 [scenario 2].
Year 1 Year 2 Year 3
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