QUESTION 2 (30 MARKS) Frieda Van Wyk, aged 35, is an audit manager at Cape Town Auditors. She divorced her husband, Davis, on 1 April 2016. Frieda and Davis have 1 daughter, Caitlyn - aged 6, who stays with Frieda in Cape Town. In her free time, Frieda does private consultation work. The following is applicable for the 2020 year of assessment: 1. Frieda earns a basic monthly salary of R55 000, that is paid directly into her bank account. R130 000 was withheld from her annual salary in respect of employee's tax for the 2020 year of assessment 2. In addition, Frieda received the following during the year Income from private consultations R905 600 Child maintenance from Davis on monthly basis R1 500 . Interest: Foreign investment R8 430 Local investment R3 680 Dividends from Investec SA R2 000 Dividends from Dell New York R1 300 3. Frieda is a member of the Cape Medical Aid Fund. She registered Caitlyn as her dependent. Her monthly premiums are RS 800. Her employer contributes 50% of the monthly premiums. 4. All employees of Cape Town Auditors are required to contribute to the Provident fund. Cape Town Auditors contribute 5% and the employees contribute 3% of the salary. 5. Frieda and her daughter stay in a 4-bedroom apartment owned by her employer. Cape Town Auditors pays all their electricity and other municipal services, but she furnished the house herself. She does not pay any rent towards the accommodation. Her remuneration proxy amounts to R490 000 6. Cape Town Auditors provided Frieda with a laptop with a specialised audit software that she uses for her audit client. She also uses the laptop for her private clients that require audit consultation, but seldomly. This costs Cape Town Auditors R1 200 per month. 7. Frieda has the right of use of a luxury motor vehicle (as defined for VAT purposes) since 1 June 2019. This vehicle is leased by Cape Town Auditors, at R15 000 (including VAT) per month, under an "operating lease" as defined in section 23A. The cash cost price of the vehicle would have been R741 000 (including VAT). Frieda travelled 21 000 kilometres in total with the luxury motor vehicle and her accurate logbook proves that 11 000 kilometres thereof was travelled for business purposes. Cape Town Auditors also paid the fuel costs amounting to R2 500 per month. Frieda was only responsible for the payment of the luxury motor vehicle's licence and paid an amount of R1 200 to the relevant authorities on 15 March 2019. 8. All employees at Cape Town Auditors receive lunch when they are working from the office. Frieda received lunch worth R6 800 during the 2020 year of assessment. She paid a total of R3 400 for the lunch. Cape Town Auditors does not have a canteen at their offices. 9. On 24 June 2019, Frieda needed tax assistance for one of her private clients. She consultant the tax department at Cape Town Auditors and paid R2 000. The cost to Cape Town Auditors for the services rendered was R4 200. 9. On 24 June 2019, Frieda needed tax assistance for one of her private clients. She consultant the tax department at Cape Town Auditors and paid R2 000. The cost to Cape Town Auditors for the services rendered was R4 200. 10. Frieda received a staff loan amounting to R25 000 at annual interest rate of 4% on 01 October 2019. The official interest rate is 7%. REQUIRED: Calculate Frieda Van Wyk's income tax liability for the 2020 year of assessment. Provide a reason for amounts not included in the calculation. Round all amounts to the nearest Rand. Show all your calculations. (30) ANNEXURE A Tax Thresholds (point at which normal tax becomes payable) Persons under 65 Persons 65 and under 75 Persons 75 and above Taxable income (Rand) 2020 2019 79 000 78 150 122 300 121 000 136 750 135 300 Taxable income RO-R195 850 R195 851 - R305 850 R305 851 -R423 300 R423 301 -R555 600 R555 601 - R708 310 R708 311 - R1 500 000 Rates of normal tax Natural persons and special trusts - 2020 Rates of tax 18% of taxable income R35 253 +26% of taxable income exceeding R195 850 R63 853 +31% of taxable income exceeding R305 850 R100 263 +36% of taxable income exceeding R423 300 R147 891 + 39% of taxable income exceeding R555 600 R207 448 + 41% of taxable income exceeding R708 310 Maintenance cost (c/km) Travel allowance Scale of values (2020 year of assessment) Where the value of vehicle is Fixed Cost (R) Fuel cost (incl VAT) (c/km) RO -R85 000 28 352 95.70 R85 001 R170 000 50 631 106.80 R170 001 - R255 000 72 983 116.00 R255 001 - R340 000 92 683 124.80 R340 001 - R425 000 112 443 133.50 R425 001 -R510 000 133 147 153.20 R510 001 - R595 000 153 850 158.40 Exceeding R595 000 153 850 158.40 34.40 43.10 47.50 51.90 60.90 71.60 88.90 88.90 Subsistence Allowance Taxable income (Rand) 2020 435 134 Meals and incidental costs Incidental costs only 2019 416 128 Tax Rebates Primary rebate (Persons under 65) Secondary rebate (Persons 65 and under 75) Tertiary rebate (Persons 75 and above) Taxable income (Rand) 2020 2019 14 220 14 067 7794 7 713 2 601 2574 QUESTION 2 (30 MARKS) Frieda Van Wyk, aged 35, is an audit manager at Cape Town Auditors. She divorced her husband, Davis, on 1 April 2016. Frieda and Davis have 1 daughter, Caitlyn - aged 6, who stays with Frieda in Cape Town. In her free time, Frieda does private consultation work. The following is applicable for the 2020 year of assessment: 1. Frieda earns a basic monthly salary of R55 000, that is paid directly into her bank account. R130 000 was withheld from her annual salary in respect of employee's tax for the 2020 year of assessment 2. In addition, Frieda received the following during the year Income from private consultations R905 600 Child maintenance from Davis on monthly basis R1 500 . Interest: Foreign investment R8 430 Local investment R3 680 Dividends from Investec SA R2 000 Dividends from Dell New York R1 300 3. Frieda is a member of the Cape Medical Aid Fund. She registered Caitlyn as her dependent. Her monthly premiums are RS 800. Her employer contributes 50% of the monthly premiums. 4. All employees of Cape Town Auditors are required to contribute to the Provident fund. Cape Town Auditors contribute 5% and the employees contribute 3% of the salary. 5. Frieda and her daughter stay in a 4-bedroom apartment owned by her employer. Cape Town Auditors pays all their electricity and other municipal services, but she furnished the house herself. She does not pay any rent towards the accommodation. Her remuneration proxy amounts to R490 000 6. Cape Town Auditors provided Frieda with a laptop with a specialised audit software that she uses for her audit client. She also uses the laptop for her private clients that require audit consultation, but seldomly. This costs Cape Town Auditors R1 200 per month. 7. Frieda has the right of use of a luxury motor vehicle (as defined for VAT purposes) since 1 June 2019. This vehicle is leased by Cape Town Auditors, at R15 000 (including VAT) per month, under an "operating lease" as defined in section 23A. The cash cost price of the vehicle would have been R741 000 (including VAT). Frieda travelled 21 000 kilometres in total with the luxury motor vehicle and her accurate logbook proves that 11 000 kilometres thereof was travelled for business purposes. Cape Town Auditors also paid the fuel costs amounting to R2 500 per month. Frieda was only responsible for the payment of the luxury motor vehicle's licence and paid an amount of R1 200 to the relevant authorities on 15 March 2019. 8. All employees at Cape Town Auditors receive lunch when they are working from the office. Frieda received lunch worth R6 800 during the 2020 year of assessment. She paid a total of R3 400 for the lunch. Cape Town Auditors does not have a canteen at their offices. 9. On 24 June 2019, Frieda needed tax assistance for one of her private clients. She consultant the tax department at Cape Town Auditors and paid R2 000. The cost to Cape Town Auditors for the services rendered was R4 200. 9. On 24 June 2019, Frieda needed tax assistance for one of her private clients. She consultant the tax department at Cape Town Auditors and paid R2 000. The cost to Cape Town Auditors for the services rendered was R4 200. 10. Frieda received a staff loan amounting to R25 000 at annual interest rate of 4% on 01 October 2019. The official interest rate is 7%. REQUIRED: Calculate Frieda Van Wyk's income tax liability for the 2020 year of assessment. Provide a reason for amounts not included in the calculation. Round all amounts to the nearest Rand. Show all your calculations. (30) ANNEXURE A Tax Thresholds (point at which normal tax becomes payable) Persons under 65 Persons 65 and under 75 Persons 75 and above Taxable income (Rand) 2020 2019 79 000 78 150 122 300 121 000 136 750 135 300 Taxable income RO-R195 850 R195 851 - R305 850 R305 851 -R423 300 R423 301 -R555 600 R555 601 - R708 310 R708 311 - R1 500 000 Rates of normal tax Natural persons and special trusts - 2020 Rates of tax 18% of taxable income R35 253 +26% of taxable income exceeding R195 850 R63 853 +31% of taxable income exceeding R305 850 R100 263 +36% of taxable income exceeding R423 300 R147 891 + 39% of taxable income exceeding R555 600 R207 448 + 41% of taxable income exceeding R708 310 Maintenance cost (c/km) Travel allowance Scale of values (2020 year of assessment) Where the value of vehicle is Fixed Cost (R) Fuel cost (incl VAT) (c/km) RO -R85 000 28 352 95.70 R85 001 R170 000 50 631 106.80 R170 001 - R255 000 72 983 116.00 R255 001 - R340 000 92 683 124.80 R340 001 - R425 000 112 443 133.50 R425 001 -R510 000 133 147 153.20 R510 001 - R595 000 153 850 158.40 Exceeding R595 000 153 850 158.40 34.40 43.10 47.50 51.90 60.90 71.60 88.90 88.90 Subsistence Allowance Taxable income (Rand) 2020 435 134 Meals and incidental costs Incidental costs only 2019 416 128 Tax Rebates Primary rebate (Persons under 65) Secondary rebate (Persons 65 and under 75) Tertiary rebate (Persons 75 and above) Taxable income (Rand) 2020 2019 14 220 14 067 7794 7 713 2 601 2574