This document contains workings, explanations and solutions to the CAS3701 Assignment 11 (QUALITY ANSWERS) 2024. For assistance whats-app us on 0.6.8..8.1.2..0.9.3.4... QUESTION 1
1. BACKGROUND
LearnCo. Limited (LearnCo.) is a top training provider that offers skills development training solution...
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.
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