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Summary Prohibited Deductions
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This document provides a detailed summary of the prohibited deductions dealt with in the Tax Legislation
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LML4804 PORTFOLIO MEMO - MAY/JUNE 2023 - SEMESTER 1 - UNISA - (DETAILED ANSWERS - DISTINCTION GUARANTEED!)
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Exempt Income
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Special Deductions
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Prohibited DeductionsNegative Test.
S23(a) Maintenance Feeding and clothing
Providing with necessities of life & comforts
S23(b) Domestic or Private expense Using a premises for any other uses other than trade =
prohibited. (Rent, repairs)
Apportioned based on floor size.
Deductions allowed e.g property rates, interest on
mortgage loan, burglar alarms, electric fencing.
IN28
NB! S23(b) must be read with s23(m)
Specific requirements:
o Must be regularly and exclusively used.
o Occupied for trade.
o Specifically equipped.
If the trade does constitute any employment or office
(may be deducted if met):
If income mainly derived from commission
(commission earned > 50% of total income) = does
not have to perform mainly at the office (traveling to
meet clients).
If income not mainly derived from commission =
duties must mainly be performed at the office.
S23(c) Recoverable expenses Under insurance contracts where you want to claim/
‘recover’ from losses.
S23(d) Interest and penalties under ‘Taxes’ = any tax in legislation.
any taxes Interest paid from penalties.
Penalties
S7E:
Amount payable by SARS to you (income).
E.g refund (overpaid taxes)
Interest is earned due to the fact that SARS takes long to
pay back the refund. (Note that interest exempt if
natural person but is limited)
S7F:
Amount payable to SARS (expense)
Can claim as deduction in YOA
SARS paid too much interest, therefore must be repaid
back to SARS.
NB: input tax (VAT) is denied on entertainment and
output tax on fringe benefits is NOT prohibited.
See s23C: VAT
S23(e) Provisions and reserves Contingent liabilities = provisions. Ito s11(a), they are not
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