Page 599 - SAIT Compendium 2016 Volume2

IN 69 Income Tax acT: InTeRPReTaTIon noTes IN 69
Interpretation Note: No. 69 Game Farming
DATE: ACT : SECTION : SUBJECT :
CONTENTS
Preamble
1 Purpose
2 Background
3 The law
4 Application of the law
4.1 Farming operations
4.2 Game-farming income
4.2.1 Income derived from game farming
4.2.2 Income not derived from game farming
4.3 Livestock
4.3.1 Meaning and nature of livestock
4.3.2 Opening and closing stock
4.3.3 The cost of acquiring game
4.3.4 Limitation under paragraph 8 of the First Schedule
4.4 Expenditure and allowances
4.5 Capital development expenditure
4.6 Housing for guests and employees
4.7 Cessation of farming operations
4.7.1 Voluntary cessation of farming operations
4.7.2 Death
(a) Income tax
(b) Capital gains tax
4.7.3 Insolvency or liquidation
4.7.4 Cessation of farming owing to the sale of land to the state 4.8 Ring-fencing of assessed losses [section 20A]
5 Conclusion
Preamble
In this Note unless the context indicates otherwise—
• ‘CGT’ means capital gains tax, being the portion of normal tax attributable to the inclusion in taxable income of a
taxable capital gain;
• ‘First Schedule’ means the First Schedule to the Act;
• ‘game’ means wild animals, birds or sh;
• ‘paragraph’ means a paragraph of the First Schedule to the Act;
• ‘section’ means a section of the Act; and
• any word or expression bears the meaning ascribed to it in the Act.
1. Purpose
•
• •
This Note—
provides guidance on the application of selected sections of the Act and paragraphs of the First Schedule to persons carrying on game-farming operations, with its primary focus being the provisions applicable to livestock;
is not intended to deal with farming in general; and
replaces Practise Note No. 6 dated 30 July 1999.
12 February 2013
INCOME TAX ACT 58 OF 1962 (the Act) Section 26 and First Schedule
Game farming
2. Background
Section 26 (1) stipulates that the taxable income of any person carrying on pastoral, agricultural or other farming operations shall, in so far as the income is derived from such operations, be determined in accordance with the Act but subject to the First Schedule. The First Schedule deals with the computation of taxable income derived from pastoral, agricultural or other farming operations.
The taxable income from farming operations is combined with the taxable income from other sources to arrive at the taxpayer’s taxable income for the year of assessment.
The First Schedule applies regardless of whether a taxpayer derives an assessed loss or a taxable income from farming operations. The Schedule may further apply even after farming operations have been discontinued [section 26 (2)].
Section 26 and the First Schedule are applicable to game farming since it comprises farming operations.
3. The law
Section 26
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