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TAX3702: Taxation of Individuals
OCT/NOV Examination 2026 Preparation
Covers Past Papers: Oct/Nov 2023 – Oct/Nov 2025
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
• South African Income Tax •
• Exam Revision Guide
TAX3702
Module Code:
Taxation of Individuals
Module Name:
Oct/Nov 2023, 2024 & 2025
Papers Covered:
Oct/Nov 2026 Examination
Prepared For:
100 marks / 3 Hours
Total Marks:
Master the concepts. Understand the logic. Earn every mark.
⋆ Exam Revision Notes | TAX3702 | 2023–2025
,TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
Question 1 [25 marks]
(a) [10 marks]
Question: Thandi Dlamini is a South African resident employed as a senior engineer.
During the 2025 year of assessment (ending 28 February 2025), she received or accrued
the following amounts:
(i) Salary of R42 000 per month for 12 months.
(ii) A performance bonus of R60 000 received on 1 March 2024.
(iii) An amount of R18 000 received from her former employer as compensation for the
early cancellation of a restraint-of-trade agreement she entered into three years ago.
(iv) Dividends of R14 000 from a South African resident company.
(v) Interest of R28 500 from a South African bank account.
(vi) A subsistence allowance of R8 000 for 10 nights away from her usual place of resi-
dence on business. SARS’s deemed amount is R680 per night (incidentals only).
You are required to calculate Thandi’s gross income for the 2025 year of assessment,
clearly identifying each item and motivating any inclusions or exclusions.
Answer:
[!] Key Concept
Gross income is defined in s 1 of the Income Tax Act 58 of 1962 as the total amount,
in cash or otherwise, received by or accrued to or in favour of a resident (or source-
based for non-residents) during a year of assessment, excluding receipts or accruals of a
capital nature, but including certain specific inclusions listed in paragraphs (a) to (n) of
the definition.
Gross Income Calculation for Thandi Dlamini – 2025 Year of Assessment
Item Amount (R) Reason
Salary (R42 000 × 12) 504 000 Employment income – para (c);
included in full
Performance bonus 60 000 Received in year of assessment;
para (c) – included
Continued on next page. . .
Page 2 of 24 ⋆
,TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
Item Amount (R) Reason
Restraint of trade 18 000 Para (cA) – receipts from re-
straint of trade agreements are
specifically included in gross
income
Local dividends 14 000 Para (k) – dividends received
from resident companies in-
cluded in gross income (subject
to exemption later)
Interest 28 500 Included in gross income; a
portion may be exempt under
s 10(1)(i)
Subsistence allowance 8 000 Para (i) – allowances included
in gross income; a deemed de-
duction applies for nights away
on business
Total Gross Income 632 500
[*] Exam Tip
Always include all receipts and accruals in gross income first, then apply the exemp-
tions in a separate step. Never exclude an item outright in the gross income calculation
– show the inclusion, then the exemption. The examiner awards marks for both steps.
(b) [8 marks]
Question: With reference to the amounts in (a) above, calculate the exempt amounts
that must be deducted from gross income to arrive at income, in terms of section 10 of the
Income Tax Act.
Answer:
[!] Key Concept
Section 10 exemptions reduce gross income to income. The most commonly tested
exemptions for individuals are:
• s 10(1)(i) – interest exemption: R23 800 for taxpayers under 65; R34 500 for tax-
payers aged 65 and older.
• s 10(1)(k)(i) – local dividends from resident companies are exempt.
Page 3 of 24 ⋆
,TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
• s 10(1)(nA) – subsistence allowance – deemed deduction for nights away on busi-
ness.
Exempt amounts:
Item Exempt (R) Provision
Local dividends 14 000 s 10(1)(k)(i) – dividends
from resident company fully
exempt
Interest (assume Thandi < 65) 23 800 s 10(1)(i) – first R23 800
exempt
Subsistence – deemed (R680 × 10) 6 800 Amount spent deemed by
SARS; excess R1 200 taxable
(R8 000 – R6 800)
Total Exempt 44 600
Income (Gross Income – Exemp- 587 900
tions)
[!!] Watch Out
The subsistence allowance exemption works differently from other exemptions. The
deemed amount approved by SARS is exempt; any excess is taxable income. If the
question specifies the SARS daily rate, always use that figure, not the full allowance.
(c) [7 marks]
Question: Define the concept of “residence” for natural persons in the context of South
African income tax, and explain the difference between the ordinarily resident test and
the physical presence test. (7 marks)
Answer:
South Africa taxes residents on their worldwide income and non-residents on income from
South African sources only. Determining residency is therefore critical to the scope of taxa-
tion.
1. Ordinarily Resident Test
A natural person is ordinarily resident in South Africa if South Africa is their “real home”
– the country to which they would naturally return after periods of absence abroad. This is a
Page 4 of 24 ⋆
,TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
factual, intention-based test. Courts look at factors such as:
• Where the taxpayer has their permanent home;
• The country of habitual abode;
• Ties to South Africa (family, property, business interests);
• The intention to return to South Africa.
2. Physical Presence Test
If a person is not ordinarily resident but has spent significant time in South Africa, they may
still qualify as a resident under the physical presence test. A person is deemed resident if they
were physically present in South Africa for:
• More than 91 days in the current year of assessment; and
• More than 91 days in each of the five preceding years of assessment; and
• More than 915 days in aggregate in the five preceding years.
[*] Exam Tip
All three conditions of the physical presence test must be met simultaneously. If any
one condition fails, the person is NOT a resident under this test. A person who ceases
to be ordinarily resident must remain outside South Africa for a continuous period of
at least 330 days to lose resident status under this test.
Page 5 of 24 ⋆
, TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
Question 2 [25 marks]
Question: Sipho Mokoena is employed by Rondavel Engineering (Pty) Ltd. During the
2025 year of assessment, the following benefits were provided to him:
(a) The company provided Sipho with a company vehicle (a passenger motor vehicle) with
a determined value (including VAT) of R380 000. The vehicle was used 60% for busi-
ness purposes and 40% for private purposes. No fuel was paid by the company for private
travel. (8 marks)
(b) The company granted Sipho a low-interest loan of R200 000 on 1 March 2024 at
an interest rate of 3% per annum. The official rate of interest is 8.25% per annum. (5
marks)
(c) The company paid Sipho’s medical aid contributions of R3 400 per month directly to
the medical scheme. (4 marks)
(d) Rondavel Engineering contributed R3 000 per month to a pension fund on Sipho’s
behalf. (4 marks)
(e) On 1 December 2024, Sipho received a long-service award (for 15 years of service) in
the form of a wristwatch valued at R9 500. (4 marks)
(a) Company Vehicle [8 marks]
Answer:
[!] Key Concept
The right of use of a motor vehicle is a specific inclusion in gross income in terms
of paragraph 7 of the Seventh Schedule. The taxable value is calculated as 3.5%
of the determined value per month (where the determined value includes VAT but
excludes a maintenance plan). This applies regardless of the extent of private use. If no
fuel is provided for private travel, the 3.5% rate applies (not 3.25%).
Calculation:
Description Amount (R)
Determined value of vehicle (incl. VAT) 380 000
Monthly taxable
value (3.5% ×
R380 000)
Page 6 of 24 ⋆
]]
TAX3702: Taxation of Individuals
OCT/NOV Examination 2026 Preparation
Covers Past Papers: Oct/Nov 2023 – Oct/Nov 2025
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
• South African Income Tax •
• Exam Revision Guide
TAX3702
Module Code:
Taxation of Individuals
Module Name:
Oct/Nov 2023, 2024 & 2025
Papers Covered:
Oct/Nov 2026 Examination
Prepared For:
100 marks / 3 Hours
Total Marks:
Master the concepts. Understand the logic. Earn every mark.
⋆ Exam Revision Notes | TAX3702 | 2023–2025
,TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
Question 1 [25 marks]
(a) [10 marks]
Question: Thandi Dlamini is a South African resident employed as a senior engineer.
During the 2025 year of assessment (ending 28 February 2025), she received or accrued
the following amounts:
(i) Salary of R42 000 per month for 12 months.
(ii) A performance bonus of R60 000 received on 1 March 2024.
(iii) An amount of R18 000 received from her former employer as compensation for the
early cancellation of a restraint-of-trade agreement she entered into three years ago.
(iv) Dividends of R14 000 from a South African resident company.
(v) Interest of R28 500 from a South African bank account.
(vi) A subsistence allowance of R8 000 for 10 nights away from her usual place of resi-
dence on business. SARS’s deemed amount is R680 per night (incidentals only).
You are required to calculate Thandi’s gross income for the 2025 year of assessment,
clearly identifying each item and motivating any inclusions or exclusions.
Answer:
[!] Key Concept
Gross income is defined in s 1 of the Income Tax Act 58 of 1962 as the total amount,
in cash or otherwise, received by or accrued to or in favour of a resident (or source-
based for non-residents) during a year of assessment, excluding receipts or accruals of a
capital nature, but including certain specific inclusions listed in paragraphs (a) to (n) of
the definition.
Gross Income Calculation for Thandi Dlamini – 2025 Year of Assessment
Item Amount (R) Reason
Salary (R42 000 × 12) 504 000 Employment income – para (c);
included in full
Performance bonus 60 000 Received in year of assessment;
para (c) – included
Continued on next page. . .
Page 2 of 24 ⋆
,TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
Item Amount (R) Reason
Restraint of trade 18 000 Para (cA) – receipts from re-
straint of trade agreements are
specifically included in gross
income
Local dividends 14 000 Para (k) – dividends received
from resident companies in-
cluded in gross income (subject
to exemption later)
Interest 28 500 Included in gross income; a
portion may be exempt under
s 10(1)(i)
Subsistence allowance 8 000 Para (i) – allowances included
in gross income; a deemed de-
duction applies for nights away
on business
Total Gross Income 632 500
[*] Exam Tip
Always include all receipts and accruals in gross income first, then apply the exemp-
tions in a separate step. Never exclude an item outright in the gross income calculation
– show the inclusion, then the exemption. The examiner awards marks for both steps.
(b) [8 marks]
Question: With reference to the amounts in (a) above, calculate the exempt amounts
that must be deducted from gross income to arrive at income, in terms of section 10 of the
Income Tax Act.
Answer:
[!] Key Concept
Section 10 exemptions reduce gross income to income. The most commonly tested
exemptions for individuals are:
• s 10(1)(i) – interest exemption: R23 800 for taxpayers under 65; R34 500 for tax-
payers aged 65 and older.
• s 10(1)(k)(i) – local dividends from resident companies are exempt.
Page 3 of 24 ⋆
,TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
• s 10(1)(nA) – subsistence allowance – deemed deduction for nights away on busi-
ness.
Exempt amounts:
Item Exempt (R) Provision
Local dividends 14 000 s 10(1)(k)(i) – dividends
from resident company fully
exempt
Interest (assume Thandi < 65) 23 800 s 10(1)(i) – first R23 800
exempt
Subsistence – deemed (R680 × 10) 6 800 Amount spent deemed by
SARS; excess R1 200 taxable
(R8 000 – R6 800)
Total Exempt 44 600
Income (Gross Income – Exemp- 587 900
tions)
[!!] Watch Out
The subsistence allowance exemption works differently from other exemptions. The
deemed amount approved by SARS is exempt; any excess is taxable income. If the
question specifies the SARS daily rate, always use that figure, not the full allowance.
(c) [7 marks]
Question: Define the concept of “residence” for natural persons in the context of South
African income tax, and explain the difference between the ordinarily resident test and
the physical presence test. (7 marks)
Answer:
South Africa taxes residents on their worldwide income and non-residents on income from
South African sources only. Determining residency is therefore critical to the scope of taxa-
tion.
1. Ordinarily Resident Test
A natural person is ordinarily resident in South Africa if South Africa is their “real home”
– the country to which they would naturally return after periods of absence abroad. This is a
Page 4 of 24 ⋆
,TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
factual, intention-based test. Courts look at factors such as:
• Where the taxpayer has their permanent home;
• The country of habitual abode;
• Ties to South Africa (family, property, business interests);
• The intention to return to South Africa.
2. Physical Presence Test
If a person is not ordinarily resident but has spent significant time in South Africa, they may
still qualify as a resident under the physical presence test. A person is deemed resident if they
were physically present in South Africa for:
• More than 91 days in the current year of assessment; and
• More than 91 days in each of the five preceding years of assessment; and
• More than 915 days in aggregate in the five preceding years.
[*] Exam Tip
All three conditions of the physical presence test must be met simultaneously. If any
one condition fails, the person is NOT a resident under this test. A person who ceases
to be ordinarily resident must remain outside South Africa for a continuous period of
at least 330 days to lose resident status under this test.
Page 5 of 24 ⋆
, TAX3702 | Exam Revision Taxation of Individuals – OCT/NOV 2023–2025
Question 2 [25 marks]
Question: Sipho Mokoena is employed by Rondavel Engineering (Pty) Ltd. During the
2025 year of assessment, the following benefits were provided to him:
(a) The company provided Sipho with a company vehicle (a passenger motor vehicle) with
a determined value (including VAT) of R380 000. The vehicle was used 60% for busi-
ness purposes and 40% for private purposes. No fuel was paid by the company for private
travel. (8 marks)
(b) The company granted Sipho a low-interest loan of R200 000 on 1 March 2024 at
an interest rate of 3% per annum. The official rate of interest is 8.25% per annum. (5
marks)
(c) The company paid Sipho’s medical aid contributions of R3 400 per month directly to
the medical scheme. (4 marks)
(d) Rondavel Engineering contributed R3 000 per month to a pension fund on Sipho’s
behalf. (4 marks)
(e) On 1 December 2024, Sipho received a long-service award (for 15 years of service) in
the form of a wristwatch valued at R9 500. (4 marks)
(a) Company Vehicle [8 marks]
Answer:
[!] Key Concept
The right of use of a motor vehicle is a specific inclusion in gross income in terms
of paragraph 7 of the Seventh Schedule. The taxable value is calculated as 3.5%
of the determined value per month (where the determined value includes VAT but
excludes a maintenance plan). This applies regardless of the extent of private use. If no
fuel is provided for private travel, the 3.5% rate applies (not 3.25%).
Calculation:
Description Amount (R)
Determined value of vehicle (incl. VAT) 380 000
Monthly taxable
value (3.5% ×
R380 000)
Page 6 of 24 ⋆
