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Revealed: The five components of gross income you need to work out your employees taxable amount

by , 11 February 2014
Gross income is the starting point and the basis for calculating the tax you must pay. Read on to find out the five components of gross income so you can avoid disputes with SARS.

The Practical Tax Loose Leaf Service explains that gross income can be broken down into the following components:

  1. The total amount,
  2. In cash or otherwise,
  3. Received by, accrued to, or in favour of a person
  4. From a South African source or a deemed South African source
  5. Excluding receipts or accruals of a capital nature.

This means, if you want to include an amount in your gross income, all these components must be present.

Sounds complicated?
 

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Use this checklist to determine whether an amount falls within your gross income:

An amount will fall within your gross income under these circumstances:

  • The amount must be received by or accrued to you.
  • It must have an ascertainable money value.
  • It doesn't have to be money, it can be a thing or right of action
  • It must be the cash equivalent of the value' of any benefits received by you.
  • You must receive the amount on your own behalf for your own benefit.
  • An amount accrues to you once you become entitled to it or if you become unconditionally entitled to it.
  • It must to be of a revenue nature
  • Receipts of a capital nature don't fall within gross income and aren't taxable
  • A capital receipt derived from floating or working capital falls in gross income and is taxable.
  • The onus is on you to decide whether any receipt or accrual is of a capital or revenue nature.
  • You're required to declare all your income (including capital receipts) in your tax return.

Now that you know what constitutes gross income you'll save costs and unnecessary disputes with the SARS.

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