Page 173 - SAIT Compendium 2016 Volume1

s 20A INCOME TAX ACT 58 OF 1962 s 20B
(before taking into account any balance of assessed
loss carried forward); or
(b) the trade contemplated in subsection (1), in respect of
which the assessed loss was incurred constitutes— (i) any sport practised by that person or any relative;
(ii) any dealing in collectibles by that person or any
relative;
(iii) the rental of residential accommodation,
unless at least 80 per cent of the residential accommodation is used by persons who are not relatives of that person for at least half of the year of assessment;
(iv) the rental of vehicles, aircraft or boats as de ned in the Eighth Schedule, unless at least 80 per cent of the vehicles, aircraft or boats are used by persons who are not relatives of that person for at least half of the year of assessment;
(v) animal showing by that person or any relative;
(vi) farming or animal breeding, unless that person carries on farming, animal breeding or activities
of a similar nature on a full-time basis;
(vii) any form of performing or creative arts practised
by that person or any relative; or
(viii) any form of gambling or betting practised by that
person or any relative.
[Sub-s. (2) amended by s. 27 (1) of Act 31 of 2005.]
(3) The provisions of subsection (1) do not apply in respect of an assessed loss incurred by a person during any year of assessment from carrying on any trade contemplated in subsection (2) (a) or (b), where that trade constitutes a business in respect of which there is a reasonable prospect of deriving taxable income (other than taxable capital gain) within a reasonable period having special regard to—
(a) the proportion of the gross income derived from that trade in that year of assessment in relation to the amount of the allowable deductions incurred in carrying on that trade during that year;
(b) the level of activities carried on by that person or the amount of expenses incurred by that person in respect of advertising, promoting or selling in carrying on that trade;
(c) whether that trade is carried on in a commercial manner, taking into account—
(i) the number of full-time employees appointed for purposes of that trade (other than persons partly or wholly employed to provide services of a domestic or private nature);
(ii) the commercial setting of the premises where the trade is carried on;
(iii) the extent of the equipment used exclusively for purposes of carrying on that trade; and
(iv) the time that the person spends at the premises conducting that business;
(d) the number of years of assessment during which assessed losses were incurred in carrying on that trade in relation to the period from the date when that person commenced carrying on that trade and taking into account—
(i) any unexpected events giving rise to any of those assessed losses; and
(ii) the nature of the business involved;
(e) the business plans of that person and any changes thereto to ensure that taxable income is derived in
future from carrying on that trade; and
(f) the extent to which any asset attributable to that trade
relative of that person for recreational purposes or
personal consumption.
(4) Subsection (3) does not apply in respect of a trade
contemplated in subsection (2) (b) (other than farming) carried on by a person during any year of assessment where that person has, during the ten year period ending on the last day of that year of the assessment, incurred an assessed loss in at least six years of assessment in carrying on that trade (before taking into account any balance of assessed loss carried forward).
(5) Notwithstanding section 20 (1) (a), any balance of assessed loss carried forward from the preceding year of assessment, which is attributable to an assessed loss in respect of which subsection (1) applied in that preceding year or any prior year of assessment, may not be set off against any income derived by that person otherwise than from carrying on the trade contemplated in subsection (1).
(6) For the purposes of this section and section 20, the income derived from any trade referred to in subsections (1) or (5), includes any amount—
(a) which is included in the income of that person in
terms of section 8 in respect of an amount deducted in any year of assessment in carrying on that trade; or
[Para. (a) substituted by s. 33 of Act 17 of 2009.]
(b) derived from the disposal after cessation of that trade
of any assets used in carrying on that trade.
(7) Notwithstanding anything to the contrary contained in this Act, all farming activities carried on by a person shall be deemed to constitute a single trade carried on by
that person for the purposes of this section.
(8) Where the provisions of subsection (2) apply during
any year of assessment in respect of any trade carried on by a person, that person must indicate the nature of the business in his or her return contemplated in section 66 for that year of assessment.
(9) For the purposes of subsections (2) (a) and (4), any assessed loss incurred in any year of assessment ending on or before 29 February 2004 shall not be taken into account.
(10) For the purposes of this section—
(a) ‘assessed loss’ means ‘assessed loss’ as de ned in
section 20 (2); and
(b) ‘relative’ in relation to a person means a spouse,
parent, child, stepchild, brother, sister, grandchild or
grandparent of that person.
[S. 20A inserted by s. 19 of Act 89 of 1969, amended by s. 16 (1) of Act 52 of 1970, by s. 15 of Act 90 of 1972, by s. 19 (1) of Act 85 of 1974, by s. 17 of Act 69 of 1975, by s. 15 of Act 113 of 1977, by s. 12 of Act 104 of 1979, by s. 15 of Act 104 of 1980, by s. 18 of Act 96 of 1981, by s. 16 of Act 91 of 1982, by s. 13 of Act 65 of 1986, by s. 14 of Act 85 of 1987 and by s. 16 (1) of Act 90 of 1988, repealed by s. 20 of Act 101 of 1990 and inserted by s. 36 (1) of Act 45 of 2003.]
20B Limitation of losses from disposal of certain assets
(1) Any deduction which is allowable during any year of assessment under section 11 (o) in respect of the disposal by a person during that year of any asset the full consideration of which will not accrue to that person during that year, must be disregarded in that year.
(2) So much of any amount disregarded in terms of subsection (1), which has not otherwise been allowed as a deduction, may be deducted from the income of that person in any subsequent year of assessment to the extent that any consideration which is received by or accrued to that person in that subsequent year from that disposal is included in the income of that person.
is used, or is available for use, by that person or any
SAIT CompendIum oF TAx LegISLATIon VoLume 1 165
INCOME TAX ACT – SECTIONS