#Payroll treatment - Bursaries and Scholarships for Individuals - Without Disabilities

Bursaries and scholarships serve as essential financial aids for individuals pursuing education. However, it's important to understand the tax implications associated with such benefits, this article will focus on individuals without disabilities. The implications are outlined in Section 10(1)(q)(ii)(aa) and (bb), as well as in Paragraphs 1 and 2(h) of the Seventh Schedule.

Meaning and Taxable Benefit:

According to the South African tax laws, any bursary or bona fide scholarship granted to enable or assist a person in studying at a recognized educational or research institution may be exempt under Section 10(1)(q). However, certain conditions apply.

If the bursary or scholarship involves a salary sacrifice by the employer to a relative of the employee, the amount granted becomes taxable in the hands of the employee. Nevertheless, the employer can still claim a deduction for this benefit. This rule came into effect on 01 March 2021.

Additionally, exemptions do not apply under certain circumstances. For instance:

- If the employee fails to complete their studies for reasons other than death, ill-health, or injury, they may be required to reimburse the employer for the bursary.

- If the remuneration proxy of the employee exceeds R600,000 during the tax year and if the bursary amount exceeds the prescribed amounts.

Tax Treatment and Examples:

For PAYE purposes, the taxable benefit of a bursary is considered an annual payment. Codes 3809 , Grade R to 12 and NQF Level 1 to 4 and 3820 are used to reflect the taxable portions NQF Levels 5 to 10 on the IRP5. The non-taxable portion are coded as 3815 and 3821.

Expenditures related to job-related training, like computer courses or management training, are not considered taxable benefits, provided they benefit the employer.

Furthermore, certain types of bursaries and study loans are taxed as fringe benefits. Examples include low-interest or interest-free loans granted by employers for study purposes.

Example:

Consider an employer who grants bursaries of R24,000 each to an employee's two children for basic education. If the employee's remuneration does not exceed R600,000 per annum, only the taxable portion exceeding R20,000 per relative (in this case, R8,000) is subject to employees' tax.

Interpretation Note 66:

In addition to statutory provisions, Interpretation Note 66 provides interpretations of terms such as "bona fide scholarship or bursary" and outlines tax implications and study assistance forms.

[Note: This article is for informational purposes only and does not constitute legal or tax advice. Readers are encouraged to consult relevant authorities or professionals for specific guidance.]

#Tax A Sured Pty Ltd - #Bursaries#Scholarships?

?

?