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If you have children in school or university or you yourself want to study, you could be saving up to R23,400 in tax per a student per a year.
Employees and business owners are able to structure salaries to take advantage of the Scholarships and Bursaries tax exemption by taking a salary sacrifice in exchange for an equal but tax-free bursary benefit.
The bursary amount may include tuition, registration fees, examination fees, books, equipment, accomodation, meals and transport.
For example:
Mr A earns R50,000 per a month, and pays tuition fees of R5,000 for his daughter to attend university. Structured correctly Mr A's taxable income will be reduced to R45,000, his employer will pay the R5,000 tuition fees. Mr A's monthly tax liability will be reduced from R12,582 per month to R10,671 per month, resulting in tax savings of R22,932 over the course of a year.
This exemption is subject to the following conditions:
- Employee must agree to repay the fees should the individual not complete the studies for reasons other than death, ill-health or injury.
- Student or learner must study at a recognised educational or research institution.
- If the scholarship or bursary relates to a relative of an employee, the employee must not earn more than R600k per a year.
The followings limits apply per a relative:
- R60,000 per annum for higher education
- R20,000 per annum for basic education to grade 12
Since these limits apply per a student, there would be quite significant tax savings should you have more than one child in school or university.
This exemption is also a great way for businesses to provide additional benefits to staff without incurring any additional costs.
Take the opportunity to have a discussion with your staff or employer to take advantage of this tax benefit.
Please consult with your accountant or tax advisor to ensure you comply with all the requirements. As always you can contact us for any assistance with regards to all tax and accounting services.