Question 1

BG (Pty) Ltd purchased a second-hand manufacturing machine for R500 000 (excluding VAT) on 1 November 2018 and brought it into use in a process of manufacture on that date. BG's year-end is 31 December. In May 2019 the machine was sold for R650 000 (excluding VAT) and not replaced. The machine was used in a process of manufacture until May 2019.

Assume that BG's taxable income for the year ended 31 December 2019, before taking the above information into account, is R1.2 million.

a) Calculate the taxable income of BG (Pty) Ltd for the year of assessment ended 31 December 2019. Indicate hoe the transactions concerning the machine affect other taxable income, showing the net effect of the principal Act separate from the net effect of the Eighth Schedule.

Question 2

Lerato elected to retire from employment 30 31 August 2018, the day after he celebrated his 60th birthday. His income and deductions for the year of assessment ended 2 February 2019 were as follows:

R

Salary (March to August 2018) 90 000

Lump sum gratuity received from his employer on his retirement

On 31 August 2018 (severance benefit) 50 000

Retirement fund lump sum benefit on commutation of annuities from pension

Fund on 31 August 2018 542 500

Special remuneration received as a member of a proto-team 25 000

Pension fund contributions (March to August 2018) 6 750

Capital gain (proceeds less base cost) 60 000

Lerato had never previously received any lump sum benefits. He had been a member of the pension fund for 35 years, and all of his contributions to the fund had previously been allowed as deductions for tax purposes. His taxable income for the previous year of assessment was R124 000, including taxable capital gains of R4 000.

a) Calculate the normal tax payable by Lerato for the year of assessment ended 28 February 2019