Taxation Mathematical Literacy

Introduction

Good Day Grade 12's

Welcome to another webquest lesson.

Today we will be focusing one of the main components of your exam and one of the big chapters in mathematical literacy.\

This being taxation.

The purpose of the lesson is to help you with

understanding tax
who pays tax
why we pay tax
how to calculate tax
different components of tax

lets get started..

Task

For us to understand what taxation is we need to know firstly that it is a very compact part of grade 12 maths.

I have arranged a range of notes for you to go through with various activities

examples with solutions to assist you.

Below are videos these videos will also be shared to the grade 12 mathematical literacy whatsapp group for you to view again at a later stage.

go through these videos
work through examples on video
make notes of key parts

https://www.youtube.com/watch?v=fTjXGaVrvG8&t=91s

So lets move onto the next step

Once you have watched these videos then click on link below to access additional notes.

https://drive.google.com/drive/folders/1fbGbxDTtqWNfSkV-w3oOPtUHCwPKMbLd

https://classroom.google.com/c/MzUxMjg3NDE5NTg0?cjc=ipzuwft

Process

Now that we have a basic understanding of what tax is lets looks at a couple of work examples

How to use the tax rate table:

1. Before you get started make sure you have the:

ANNUAL TAXABLE INCOME
THE AGE OF THE INDIVIDUAL

If the annual taxable income is not given, you can find it using the following steps:

1.1 Determine the ANNUAL GROSS INCOME: available
Monthly Gross Income × 12

1.2 Determine the ANNUAL PENSION FUND and ANNUAL UIF

1.3 Find annual taxable income:
Annual gross income – (annual pension fund + annual UIF)

2. Use the annual taxable income to determine the correct bracket. (Bracket 1 – 7)

%

Bottom of bracket

Fixed amount

3. Use the information in the “rates of tax” column to perform the calculation:

Income tax = Fixed amount + [ % × (taxable income from step 2 – bottom of bracket)]

4. Subtract applicable tax rebates.

5. Divide answer by 12 if monthly tax is asked.

Example 1 – Working with tax tables

Study the tax tables issued by SARS in 2014/15 and answer the questions that follow.

Tax Tables, Rebates and Thresholds – as issued in the SARS Tax Guide for 2014/2015

Will a 67-year-old man with an annual taxable income of R110 000 pay income tax in 2014/15?
Determine the tax payable (before tax rebates) for the following people:
1. A 34-year-old woman with an annual taxable income of R200 000.
2. A 63-year-old woman with an annual taxable income of R380 000.
3. A 75-year-old man with an annual taxable income of R130 000.
Determine net tax payable (after tax rebates) for the people mentioned in question 2.
An 80-year-old man has an annual tax payable (before tax rebates) of R21 600. Determine his annual taxable income if it is below the tax threshold and he does not pay income tax.
Show how the Tax Threshold of R110 200 was determined for Age 65 to below 75.

Solution:

Tax Thresholds Table:
Age 65 to below 75 = R110 200
The taxable income is less than the threshold.

∴ He will not pay income tax in 2014/15.
SARS Tax Table:
1. Bracket 2 (174 551 – 272 700)
  = R31 419 + 0,25 × (R200 000 – R174 550)
  = R31 419 + 0,25 × R25 450
  = R31 419 + R6 362,50
  = R37 781,50
2. Bracket 4 (377 451 – 528 000)
  = R87 382 + 0,35 × (R380 000 – R377 450)
  = R87 382 + 0,35 × R2 550
  = R87 382 + R892,50
  = R88 274,50
3. Bracket 1 (0 – 174 550)
  = R130 000 × 0,18
  = R23 400
Tax Rebates Table:
1. 34-year-old: Primary rebate = R12 726
  R37 781,50 – R12 726 = R25 055,50
2. 63-year-old: Primary rebate = R12 726
  R88 274,50 – R12 726 = R75 548,50
3. 75-year-old: Primary rebate + Secondary rebate + Tertiary rebate
  = R12 726 + R7 110 + R2 367 = R22 203
  R23 400 – R22 203 = R1 197
Tax Threshold Table: Age 75 and over = R123 350 ∴ Bracket 1 (18% of taxable income)
∴ R21 600 = 0,18 × Taxable Income
R21 600 ÷ 0,18 = Taxable Income OR Taxable Income = R21 600 × 10018
Taxable Income = R120 000
Tax Threshold occurs when the Tax Payable is the same as the Rebate for an age group
∴ Rebate age 65 to below 75 = primary + secondary
                                               = R12 726 + R7 110
                                               = R19 836
∴ Tax Payable = R19 836
Tax Payable: Bracket 1 (18% of Taxable Income)
Tax Payable = 0,18
× Taxable Income
R19 836 = 0,18 × Taxable Income
R19 836 ÷ 0,18 = Taxable Income   OR Taxable Income = R19 836 × 10018
Taxable Income = R110 200
∴ Tax Threshold = R110 200 for age 65 to below 75

Evaluation

So we know how to go about taxation and how it is calculated by looking at the work example and the videos displayed now it is time for you to try doing this on your own,

remember to always refer to the previous examples.\

also note to use the tables in the work example to assit you with the following.

Activity 1

Ulwazi received his employee tax certificate (IRP5) (ANNEXURE A) for the financial year ending 28 February 2013. Some of the information has been omitted.

Use ANNEXURE A to answer the following questions.

(a) Briefly explain the difference between an employee and an employer.

(b) What does the abbreviation UIF stand for?

(c) Write down the taxable amount that Ulwazi received as an annual payment.

(d) Did Ulwazi receive a non-taxable reimbursive travel allowance? Give a valid reason for

your answer.

(e) Calculate the average monthly medical scheme fees tax credit.

(f) Calculate the missing amount A.

(g) Indicate how the gross non-retirement funding income was calculated.

Conclusion

Once you have completed the activity be sure to check your answers and do the following.