Employee Relative Education Tax Benefit
The cost of educating our youth has grown exponentially and has become a major burden on many parents and caregivers. Rewarding employees and creating loyalty remains a costly exercise for employers. Employers are faced with the daunting task of finding creative initiatives to successfully implement employee benefits that are not associated with huge financial and administrative strains to them.
Employers and employees can benefit from the lesser known and underutilised tax deductible education benefit for the relatives of employees, as offered by SARS, which can significantly impact the lives of its employees financially.
Section 10(1)(q) of the Income Tax Act 1962 makes exempt from taxable income, any bona fide scholarship or bursary granted to assist or enable a relative of an employee to study at a recognised educational or research institution. The following conditions have to be applied with in order for the bursary or scholarship to be exempt from tax:
- The employee’s remuneration proxy must be R600 000 or less;
- The scholarship or bursary in respect of studies from Grade R–12 (or a qualification to which a NQF level from 1 up to and including 4 has been allocated) should not exceed R20 000 per annum (for disabled students the amount is R30 000 per annum);
- The scholarship or bursary in respect of a Tertiary education qualification (a NQF level from 5 up to and including 10 has been allocated) should not exceed R60 000 per annum (for disabled students the amount is R90 000 per annum).
The bursary or scholarship can cover expenses relating to the following costs:
- Tuition Fees
- Registration Fees
- Examination Fees
- Equipment & School uniforms
- Meals / meal vouchers
- Transport (from residence to learning institution and back)
Article written by Marisa du Plessis