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Five components that make up your gross income and determine your tax amount

by , 03 November 2014
When you pay your company's tax, you need to work out your gross income. This is what SARS will tax you on.

If you get this wrong, you'll face SARS penalties and serious problems.

That's why today we're revealing five components of gross income that will help you work it out correctly.

Read on to discover what they are...

 

These are the five components of gross income

 
1. Total amount
• There must be an amount received or accrued by or to you before it can be included in your gross income.
• This includes, not only money, but also the value of every form of property you earned that has a monetary value.
 
 
2. In cash or otherwise 
• The term 'cash or otherwise' includes anything that has an ascertainable value or monetary worth, i.e. it may be a thing or right of action (copyright).
• It also includes 'the cash equivalent of the value' of any benefits.
 
3. Received by or accrued to you
• You may either 'receive' an amount or it can 'accrue' to you.
• An amount will be included in your gross income on the earlier of either the date of its receipt or the date of accrual.
 
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4. Capital or revenue amounts
You have to determine whether an asset constitutes as part of your capital structure, i.e. you use it to generate income, or if you have it with the intention of generating income through its re-sale. Amounts received by or accrued to you can be either:
 
• Revenue receipts (gross income and possibly taxable);
• Capital receipts (not part of gross income and therefore not taxable); and
• Capital receipts could also consist of working/ floating capital, which forms part of gross income and are possibly taxable.
 
5. The frequency of activities
If you regularly buy and sell assets, SARS will make the presumption that the proceeds are income. If you infrequently buy and sell assets, the proceeds are more likely to be of a capital nature. 
 
Consider these five components to help you determine what counts as your company's gross income so you can work out your tax correctly. 
 
Check out the Practical Tax Loose Leaf Service for more on gross income. 
 


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