CAS3701
Assignment 11 2024
Unique Number:
Due Date: 13 September 2024
QUESTION 1
TASK 1
a.
In accordance with the provisions of the Income Tax Act, 58 of 1962 and the Tax
Administration Act, 28 of 2011, all employees earning taxable income in South Africa must be
registered for tax purposes. The Income Tax Act defines a taxpayer as any individual who
derives income that falls within the scope of taxable income, including salaries or wages.
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QUESTION 1
TASK 1
a.
In accordance with the provisions of the Income Tax Act, 58 of 1962 and the Tax
Administration Act, 28 of 2011, all employees earning taxable income in South Africa must
be registered for tax purposes. The Income Tax Act defines a taxpayer as any individual
who derives income that falls within the scope of taxable income, including salaries or
wages. Specifically, Section 10 of the Income Tax Act provides for tax exemptions, but
salaries above certain thresholds are subject to tax. The five non-facilitator employees of
LearnCo., earning R15,000 per month, equate to an annual gross income of R180,000,
which exceeds the tax threshold for individuals under the age of 65, set at R95,750 for the
2024 tax year. Therefore, they are liable for taxation on this income.
The Tax Administration Act, through Section 67 of the Act, mandates that all individuals
earning taxable income must be registered as taxpayers. Additionally, Section 69 of the Tax
Administration Act requires employers to submit accurate payroll data to the South African
Revenue Service (SARS), ensuring that all employees’ tax obligations are met. This means
LearnCo. is legally obligated to register these employees with SARS and deduct Pay-As-
You-Earn (PAYE) tax from their salaries.
Furthermore, LearnCo.’s current practice of accounting for these payments as general
expenses, rather than as employee salaries, breaches the requirements of the Income Tax
Act and could lead to penalties and interest under the Tax Administration Act. The CFO’s
justification that withholding tax obligations would relieve these employees of a financial
burden is irrelevant in light of the employer’s legal duty to deduct PAYE. Not registering
these employees as official staff and failing to deduct the applicable tax is a violation of tax
laws and exposes LearnCo. to potential compliance risks. Therefore, these non-facilitator
employees must be formally registered as taxpayers.
b.
The current treatment of non-facilitator payroll expenses by LearnCo is incorrect and
inconsistent with the requirements of South African tax legislation, specifically the Income
Tax Act No. 58 of 1962 and the Tax Administration Act No. 28 of 2011.
