On 31 December 2021, Pete Gregg (60 years) was forced to retire from Starry Jewellers (Pty) Ltd due to ill health. Pete has been working for Starry Jewellers (Pty) Ltd for over 30 years. Upon his retirement, Pete was awarded the following:

• A gold wristwatch, which cost the company R4 000 to manufacture, in appreciation of his long service to the company. He had never received an award in respect of long service. The normal wholesale price of the watch when it is sold to jewelers is R10 000. These retailers then sell their trading stock of gold watches at a mark-up of 50% on cost.

His other receipts and accruals during the current year of assessment were as follows:

• A cash salary of R25 000 a month.

• The use of a company car, which cost R325 350 (including VAT). All costs were paid by

  Starry Jewelers (Pty) Ltd. On his retirement, Pete ceased to have the use of this car.

• A 10-day holiday at a beach cottage owned by Starry Jewelers (Pty) Ltd. The

  accommodation is let to non-employees at a rate of R500 per person per day. Pete and his wife, Tracey, invited their two children who then joined them at the beach cottage for 10 days.

• Starry Jewelers (Pty) Ltd pays Pete’s monthly home telephone account. The total amount paid during the year of assessment was R12 000. Pete is required to make business calls from home from time to time.

• A loan of R120 000 at an interest rate of 2% a year was granted to him on 1 March 2021. Pete used the loan to purchase a flat. The flat had been let to tenants for the entire year of assessment at a monthly rental of R6 000.
  On retirement, Pete was required to repay the loan, which he did using the proceeds of a mortgage bond that he had taken out on the property. Interest incurred on the mortgage bond for January and February 2022 amounted to R3 000 in total.

• Assume the official rate of interest is 7% for the period 1 March 2021 to 31 July 2021 and 7,75% from 1 August 2021.

• Pete earned R10 000 of foreign dividends on his shares in the UK and R24 500 of interest on his South African investments.

• Pete paid R2 300 for his first provisional tax payment.

REQUIRED

Q.6.1 Discuss whether Pete Gregg is required to register for provisional tax purposes. (2) (18)

Q.6.2

Calculate Pete Gregg’s PAYE for the 2022 tax assessment. (If an amount is not to be included in the calculation, then reflect this as zero and provide a reason as to why the amount is excluded.)

Q.6.3

Calculate Pete Gregg’s second provisional tax payment due for the 2022 tax year. (Hint: Start with the Balance of remuneration amount and make the necessary adjustments).

Answer rating: 100% (QA)

Q 6 1 ANSWER Pete Gregg is not required to register for provisional tax purposes as his annual taxab... View the full answer