TAX3701 ASSIGNMENT 1 MEMO 2026
DUE 16 APRIL 2026
Thabo Manufacturing (Pty) Ltd (TM) is a South African company located in
Durban, South Africa and manufactures a wide range on concrete products. TM’s
year of assessment ends on 31 March 2026, is a registered VAT vendor and not a
small business corporation as defined. All amounts stated excludes VAT, unless
Description Calculation / Reason Amount (R)
GROSS INCOME
Sales As per accounting records 27,789,261
Interest received (SA Taxable (gross income definition) 17,780
banks)
Foreign dividends Fully taxable – resident taxed on worldwide 145,200
(3% holding) income; no exemption (less than 10% holding)
Recoupment on Proceeds (R360,000) – Tax value (R356,250) = 3,750
written-off delivery R3,750 (limited to allowances claimed)
truck
Total gross income 27,955,991
LESS: EXEMPT
INCOME
Local dividends (SA Exempt u/s 10(1)(k) (114,520)
companies)
INCOME (before 27,841,471
deductions)
LESS: DEDUCTIONS
Cost of sales Opening stock 3,785,261 + Purchases (14,697,202)
15,125,187 – Closing stock 4,213,246
Salaries and wages Deductible u/s 11(a) (2,250,150)
, Employer pension Deductible u/s 11(l) (525,350)
contributions
Annuity to former Deductible u/s 11(m) (presumed retired due to ill (52,750)
employee health/old age)
Bad debt (liquidated Written off – deductible u/s 11(i) (amount was (22,520)
client) previously included in income)
Doubtful debts List of doubtful debts R250,800; 75% in arrears (15,775)
allowance (net) >90 but <120 days → 25% allowance =
R47,025. Less previous allowance R31,250
(added back in current year) = net deduction
R15,775
Restraint of trade R225,000 paid, only R200,000 taxable in (50,000)
payment employee’s hands. Deduction u/s 11(cA) =
lower of (200,000/3=66,667) or
(200,000/4=50,000) = R50,000
Learnership • Disabled, NQF5, completed 31/1/2026: (80,000)
allowances (s12H) completion allowance R60,000
• Non-disabled, NQF8, entered 1/5/2025
(24-month agreement): entering allowance for
first 12 months R20,000
Total
Legal fees (debt Deductible u/s 11(c) – collection of trade debtors (12,700)
collection)
Legal fees (divorce Not deductible – private matter, not in –
case) production of income
DUE 16 APRIL 2026
Thabo Manufacturing (Pty) Ltd (TM) is a South African company located in
Durban, South Africa and manufactures a wide range on concrete products. TM’s
year of assessment ends on 31 March 2026, is a registered VAT vendor and not a
small business corporation as defined. All amounts stated excludes VAT, unless
Description Calculation / Reason Amount (R)
GROSS INCOME
Sales As per accounting records 27,789,261
Interest received (SA Taxable (gross income definition) 17,780
banks)
Foreign dividends Fully taxable – resident taxed on worldwide 145,200
(3% holding) income; no exemption (less than 10% holding)
Recoupment on Proceeds (R360,000) – Tax value (R356,250) = 3,750
written-off delivery R3,750 (limited to allowances claimed)
truck
Total gross income 27,955,991
LESS: EXEMPT
INCOME
Local dividends (SA Exempt u/s 10(1)(k) (114,520)
companies)
INCOME (before 27,841,471
deductions)
LESS: DEDUCTIONS
Cost of sales Opening stock 3,785,261 + Purchases (14,697,202)
15,125,187 – Closing stock 4,213,246
Salaries and wages Deductible u/s 11(a) (2,250,150)
, Employer pension Deductible u/s 11(l) (525,350)
contributions
Annuity to former Deductible u/s 11(m) (presumed retired due to ill (52,750)
employee health/old age)
Bad debt (liquidated Written off – deductible u/s 11(i) (amount was (22,520)
client) previously included in income)
Doubtful debts List of doubtful debts R250,800; 75% in arrears (15,775)
allowance (net) >90 but <120 days → 25% allowance =
R47,025. Less previous allowance R31,250
(added back in current year) = net deduction
R15,775
Restraint of trade R225,000 paid, only R200,000 taxable in (50,000)
payment employee’s hands. Deduction u/s 11(cA) =
lower of (200,000/3=66,667) or
(200,000/4=50,000) = R50,000
Learnership • Disabled, NQF5, completed 31/1/2026: (80,000)
allowances (s12H) completion allowance R60,000
• Non-disabled, NQF8, entered 1/5/2025
(24-month agreement): entering allowance for
first 12 months R20,000
Total
Legal fees (debt Deductible u/s 11(c) – collection of trade debtors (12,700)
collection)
Legal fees (divorce Not deductible – private matter, not in –
case) production of income
