As role players in contributing to the recruitment of many of the country’s outgoing graduates from tertiary institutions, several reputable companies in South Africa offer bursaries suited for their respective fields of work.
But then seeing that, by definition, a bursary is a sum of money awarded to students based on financial need as well as academic performance. The question arises as to whether it is a taxable amount of money and if it is when it is taxable.
Companies must find ways to stretch the same funds further as their budgets come under growing pressure. Fortunately, the South African tax system permits this, with potential advantages for employees..
This is because any bona fide scholarship or bursary awarded to enable or help a person to study at a recognised institution is exempt from normal tax.
The Revenue Amendment Bill of 2017 raised the salary threshold for employees who are eligible for this benefit as well as the amounts that are payable (applicable to the 2018 tax year).
Companies can now assist an employee's relative if the following requirements are met by using the SARS bursary tax:
- The employee’s remuneration is up to R 600 000 per annum, i.e. up to R 50 000 per month, or less, and
- The employee has children or family members studying between grades R and 12, or NQF levels 1 through 10, and
- The employee is contracted to repay the bursary in the event of the bursary recipient not completing their studies (other than for reason of death, ill-health or injury).
The company may pay employees who meet the aforementioned requirements between R 20 000 and R 60 000 each year, per learner, tax-free. Additionally, the numbers are significantly higher if the person has a disability.
However, employees looking to benefit from the SARS bursary tax should keep the conditions listed below in mind as failure to comply with them will mean that it becomes taxable as a fringe benefit:
The institution must be a legally recognised educational or research institution in South Africa, or, if it is a foreign institution, it must have received formal recognition from SAQA (www.saqa.org.za);
This initiative is not applicable if the employee receives a commission or bonus that would bring their annual income above R 600 000;
