Employer bursary/scholarship tax adjustments

qualifying for the bursary or scholarship exemption.

Therefore where an employer paid for the education of an employee’s relative between grades R to 8, this would be regarded as a fringe benefit and subject to employee’s tax in the hands of the employee.

The provisions of Section 10(1)(q) are that if an employee earns not more than R250 000 during a particular year of assessment, certain exemptions are allowed, which are as follows:

R10 000 in respect of studies up to matric (qualifications to which an NQF Level 1 up to and including Level 4 has been allocated by the South African Qualifications Authority (SAQA) under the NQF Act).

R30 000 in respect of further education (qualifications to which an NQF Level 5 up to and including Level 10 has been allocated by SAQA under the NQF Act).

The proposed amendment in terms of the Draft Taxation Laws and Amendment Bill, 2015, is that the Section 10(1)(q) exemption in respect of bursaries or scholarships awarded to relatives of employees be extended to include bursaries for grades R to 8.

Grades R to 8 comprise most of South Africa’s basic education and many of the skills and knowledge gained in these grades are essential to help build further knowledge and skills. These are regarded as the foundation years of the education system.

The proposed amendments will be deemed to have come into operation from March 1, 2013 and apply in respect of the year of assessment commencing on or after the date.

The proposal will be an incentive to encourage employers to provide bursaries to employees’ relatives for basic education in the schools. These learners will have the opportunity to get a proper education that will enable them to obtain jobs that match their qualifications and get them into mainstream employment in the long term. Education should be seen to be a priority and critical to development and nation building.

A proper education has the potential to increase the employability and income-generating capacity of South Africa’s poor, enabling them to gain employment or be entrepreneurs in their own right.

Ally is a tax consultant at KPMG. Call her at 060 9768436 or e-mail Khadija.ally@kpmg.co.za

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