Mr Makubu is a South African resident who owns a panel beating (motor vehicle repair) business, His-Way Mechanics, in Pretoria. On 13 January 2023, Mr. Makubu entered into a contract with Mr. Naidoo whereby Mr. Makubu was to purchase parts needed for the repair of vehicles in his business in Pretoria. The agreement provided that Mr. Naidoo would be paid R10 000 upon conclusion of the contract and R30 000 upon delivery of parts. Mr. Naidoo was paid the R10 000 on 13 January 2023 and the balance was paid when the parts were delivered on 15 March 2023. Mr. Sithole worked as a motor mechanic for His-Way Mechanics for 10 years. In 2020 His Way Mechanics engaged in a retrenchment exercise as part of the general policy to reduce their staff due to continuing poor performance of the business. As a result, Mr. Sithole was retrenched on 30 November 2022. Mr. Sithole received R500 000 upon retrenchment as compensation for the termination of his employment. He was also paid R15 000 in respect of a restraint of trade, in terms of which he was prohibited from engaging in any motor mechanic services and activities in and around Pretoria for two years after the termination of his employment. 

WHAT IS REQUIRED OF YOU: With reference to relevant authorities, answer the following questions for the 2022/2023 year of assessment:

(a) Explain whether Mr. Naidoo should include both amounts of R10 000 and the balance of R30 000 in his gross income for the 2022/2023 year of assessment. 

(b) Does the lump sum payment received in respect of the termination of services form part of Mr. Sithole's gross income? 

(c) Does any payment received in respect of a restraint of trade form part of Mr. Sithole's gross income?

Answer rating: 100% (QA)

a Whether Mr Naidoo should include both amounts of R10000 and the balance of R30000 in his gross inc... View the full answer