Mathematical Literacy Level 4 Module 8

Mathematical Literacy NQF 4 Downloaded from hlayiso.com Maths Lit NQF Level 4

Taxation Module 8 Downloaded from hlayiso.com Maths Lit NQF Level 4

Overview 8.1 Value-added Tax (VAT) 8.2 Information and calculations on a payslip 8.2 Understanding personal income tax Downloaded from hlayiso.com Maths Lit NQF Level 4

Value-added Tax (VAT) VAT Unit 8.1 Value Added Tax is the tax charged when we purchase goods and services. • When we do business transactions, we pay 14% VAT on most goods and services. • Every month those businesses (also called vendors) pay the VAT to the South African Revenue Service (SARS). • In other words, businesses collect VAT on behalf of SARS. Downloaded from hlayiso.com Maths Lit NQF Level 4

VAT-inclusive and VAT-exclusive Unit 8.1 VAT included • Most prices are advertised as being VAT-inclusive meaning that the VAT payable is part of the advertised price. + VAT • The price can also be shown excluding VAT and the VAT value would be added to the advertised price. Downloaded from hlayiso.com Maths Lit NQF Level 4

Calculating VAT on VAT–exclusive prices Unit 8.1 How is this done? A plumber gives a customer a quote for R1 845,00. The price does not include VAT. To calculate the VAT: 14% × R1 845 = R258,30 The total cost that the customer will pay = R1 845 + R258,30 = R2 103,30 Inclusive VAT is 14% of the item price Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.1 page 177 Unit 8.1 1. A tour operator charges a group of tourists R2 465,00 (VAT exclusive) for a trip. Calculate the cost the tourists would actually pay for the trip. 2. Mr Marotse gives his client an invoice for R987,65. Calculate the VAT amount Mr Marotse would pay to SARS. Downloaded from hlayiso.com Maths Lit NQF Level 4

Exercise 8.1 Unit 8.1 Complete Exercise 8.1 on page 177 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

Information and calculations on aUnitpayslip 8.2 The payslip includes important information and it is the employee’s responsibility to check that all the details are correct. The payslip includes: 1 Gross earnings 2 Deductions: Pay As You Earn (PAYE) tax 3 Unemployment Insurance Fund (UIF) contributions 4 other deductions e.g. pension and medical aid contributions Downloaded from hlayiso.com Maths Lit NQF Level 4

Understanding UIF Unit 8.2 The purpose of UIF is to provide support to workers when they cannot earn an income. The benefits covered by UIF are: 1 Unemployment benefits 2 Illness benefits 3 Maternity benefits 4 Adoption benefits 5 Death benefits Downloaded from hlayiso.com Maths Lit NQF Level 4

How employees benefit from UIF Unit 8.2 “An employee is entitled to 1 day’s pay for every 6 days worked to a maximum of 238 days.” • If you are no longer employed, you go to the Department of Labour offices with your identity documents and banking details. You must sign in every 4 weeks. After 6 - 8 weeks you will receive a pay-out every 4 weeks, until your benefit expires. Downloaded from hlayiso.com Maths Lit NQF Level 4

Payment into UIF Unit 8.2 “The employer deducts 1% entitled to of each employee’s basic salary for UIF • If 1% is greater than R148,72 then the maximum i.e. R148,72 is deducted. • The employer pays an equal amount of 1% of each employee’s basic salary into the fund. This means that the employer pays 2% of the basic salary or the maximum amount of R297,44 into the fund. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.2 page 178 Unit 8.2 Eric earns R12 500. a) Calculate the UIF portion his employer will deduct from his salary. b) How much will his employer pay over to SARS? Explain. a) 1% × R12 500 = R125,00 b) R250,00. His employer must also pay R125,00 to SARS. Downloaded from hlayiso.com Maths Lit NQF Level 4

Exercise 8.2 Unit 8.2 Complete Exercise 8.2 on page 178 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

Understanding personal income tax Unit 8.3 • Income tax is an important source of revenue for the government. • Income tax is the tax that employees pay on their earnings. • Every year during the budget speech, the Minister of Finance announces the new tax rates for the financial year. • These rates are issued in a tax table. Downloaded from hlayiso.com Maths Lit NQF Level 4

How to calculate a person’s monthly Unit 8.3 tax deduction 1 Determine the gross annual salary. 2 Determine allowable deductions. Subtract the allowable deductions from gross annual salary. What remains is the taxable salary. 3 • Pension maximum of 7,5% of basic income • Retirement annuities (with limits) • Other exceptions. 4 Determine the tax bracket. 5 Calculate the annual tax according to the tax bracket. Downloaded from hlayiso.com Maths Lit NQF Level 4

How to calculate a person’s monthly Unit 8.3 tax deduction 6 Subtract any rebate that is applicable. Subtract medical aid credits (according to rates). This gives 7 the annual tax amount payable. 8 Divide the calculated tax by 12 to get the monthly tax payable. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 Unit 8.3 Refiloe earns R425 600 per year. Her pension contribution is R5 627,08 per month and her medical aid contribution is R1 876,45 per month. Her husband and two children are her dependents. 1. Calculate the amount that can be deducted from Refiloe’s gross income for pension contributions. 2. Calculate her monthly tax payable. Refer to the tax table for 2017 to 2018. 3. When Refiloe completes her tax return at the end of the tax year, she can claim a rebate on her medical aid contributions. Calculate the rebate amount. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 4. Refiloe started a new job on 01 November 2017. Her salary increased to R585 740 per annum. a) Calculate her annual income for the year 1 March 2017 to 28 February 2018. b) Calculate her taxable income. c) How does the increase affect Refiloe’s tax? Explain fully. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 1. Annual pension contribution: = 5 627,08 × 12 = R67 524,96 Maximum pension rebate: = 27,5% of R365 000 = R100 375 Refiloe may deduct her total pension contribution because it is less than the maximum. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 2. Taxable income = gross income – pension rebate = R425 600 – 67 524,96 = R358 075,04 Tax bracket: 296 541 - 410 460 Annual tax payable = 61 910 + 31% of taxable income above 296 540 = 61 910 + 31% × (358 075,04 – 296 540) = 61 910 + (31% × 61 535,04) = 61 910 + 19 075,86 = R80 985,86 Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 Deduct primary rebate: 80 985,86 – 13 635 = R67 350,86 Monthly tax payable: = 67 350,86 ÷ 12 = R5 612,57 Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 3. Refiloe has her husband and two children on her medical aid. She may claim R303 per month for herself (main member) and her husband (first additional member). She may also claim R240 per month for each of her two children. (R303 × 2) + (R204 × 2) = R1 014 per month. She may claim R1 014 × 12 = R12 168 per year as a tax deduction when she submits her tax return at the end of the tax year. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 4. a) Refiloe’s monthly income before the increase = 425 600 ÷ 12 = R35 466,67 She earned this monthly income for 8 months from 01 March to 31 October 2017. Her new monthly income = R585 740 ÷ 12 = R48 811,67 She earned this monthly income for 4 months from 01 November 2017 to 28 February 2018. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 4. Her annual income = (35 466,67 × 8) + (48 811,67 × 4) = 283 733,36 + 195 246,68 = R478 980,04 Taxable income = gross income – pension rebate = 478 980,04 – 67 524,96 = R411 455,08 Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 4. b) Refiloe’s monthly income before the increase = 425 600 ÷ 12 = R35 466,67 She earned this monthly income for 8 months from 01 March to 31 October 2017. Her new monthly income = R585 740 ÷ 12 = R48 811,67 She earned this monthly income for 4 months from 01 November 2017 to 28 February 2018. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 8.3 page 180 continued … Unit 8.3 4. c) Refiloe falls into a new tax bracket and her tax will increase. Tax bracket: 410 461 – 555 600 Annual tax payable = 97 225 + 36% of taxable income above 410 460 = 97 225 + 36% × (411 455,08 – 410 460) = 97 225 + (36% × 995,08) = 97 225 + 358,23 = R97 583,23 Deduct primary rebate: 97 583,23 – 13 635 = R83 948,23. Her annual tax increases from R67 350,86 to R83 948,23. This is an increase of 24,6% Downloaded from hlayiso.com Maths Lit NQF Level 4

Exercise 8.3 Unit 8.3 Complete Exercise 8.3 on page 182 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

Module assessment Module 8 Complete Module assessment on page 183 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

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