I (Kimberley Naidoo) am 52 years old and a single mother of 2 children. I am a

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I (Kimberley Naidoo) am 52 years old and a single mother of 2 children. I am a registered VAT vendor and run my own business as a sole proprietor. I bake from home for the local home industry. I employ my eldest daughter (Samantha 28 years old). Samantha is married and has a son. Samantha bakes for me for 18 hours a week (at anytime during the week,whenever she can fit it in). I paid her a market related salary of R30 000 a month for the full year of assessment. I do not receive a salary myself. I use the profits of the business as my salary. I am currently tax compliant and have also registered as an employer. This is the first time that Samantha is working, so she has never been a taxpayer before. Samantha only works for me, the remainder of her time she is a full-time mom.
Samantha provided you with the following regarding the savings plan that she has, as she does not contribute to any retirement fund:
Investment (money inherited from her late father):
Balance at end of day - 28 February 2021 R1 894 304
Annual rate of interest earned - capitalised on 1st day of every month* 7.5% per annum
Monthly contributions towards investment - made on 1st day of every month 5% of salary
Balance at end of day - 28 February 2022 R2 060 000
Extracts from bank records of monthly interest earned for respective periods reflected the following:
Month ended 28 February 2021 R10 899*
Month ended 31 March 2021 R12 145*
Month ended 28 February 2022 R11 852*
Month ended 31 March 2022 R13 207*
*Paid in on 1st day of the following month.
Samantha has the following operating expenses:
Average monthly electricity account R8 000
Gas for the stove for the 2022 year of assessment R16 000
She has copies of all her municipal accounts and gas bills as proof of these amounts.
TAX3702 Concession Assignment S2 2022 4
Question 1 (continued)
On 1 June 2021, during the current year of assessment, I gave Samantha a new big gas stove so that load-shedding does not affect her. The stove cost me R22 000 including VAT. I never used the stove. The stove was on a promotional sale and its normal price was R24 000 including VAT, the company delivered it directly to Samantha at a cost of R500 (I paid for the delivery). She only uses this stove for the baking she does for me (she keeps it in her garage).
Required
Marks
a)
Compute Samantha's gross income for the 2022 year of assessment , address all amounts in the question and support with reasons.
8
b)
Please explain at what rate Kimberley should withhold tax (if any) from Samantha.
6
c)
Discuss whether Samantha will be able to deduct any expenses for income tax purposes. You do not need to provide a calculation.
4
d)
Give Samantha advice on how her affairs could be structured more tax efficiently (based solely on the above information) and solely on the decreasing of taxable income.
1 mark will be awarded for communication skills.
9
Question 1 (continued):
Required
Marks
a)
Compute Jody's section 6A credit, given the information above. Please briefly advise Jody on the choices you made in this calculation in the form of notes.
3
b)
For this part only, assume Jody's contributions per month amount to R10 000 and his employer contributes a further R5 000 per month.
Calculate Jody's section 6B credit. Please briefly advise Jody on the choices you made in this calculation in the form of notes.