While most fringe benefits offered to employees are taxable, there are exemptions in the case of bursaries and scholarships. If your employer offers bursaries and/or scholarships to employees and their families, a portion of the benefit will not be taxed. This tax benefit does not apply to a bonus awarded on completion of your studies, or to payments to reimburse you for the cost of your studies.
Requirements to qualify
- The scholarship or bursary can only be granted for study at a recognised educational institution.
- If you (as the employee) receive the bursary or scholarship, you must agree to repay your employer if you fail to complete the studies (unless you fail to complete as a result of death, ill-health or injury).
- You cannot sacrifice part of your salary in order to receive the scholarship or bursary
- If a relative of yours is to receive the bursary or scholarship, you (the employee) cannot earn more than R600,000 per annum.
The value of the benefit
If you (as the employee) receive the scholarship or bursary for your own studies, there is no limit to the benefit. If the scholarship or bursary is for the benefit of a relative, the tax benefit is limited to R20 000 for Grade R to Grade 12 and for studies up to NQF 4, and to R60 000 for studies from NQF5 and above. However, when the bursary or scholarship benefit is granted to a disabled relative of the employee, the exemption limit is raised to R30 000 per relative for Grade R to Grade 12 and for studies up to NQF 4, and R90 000 for studies from NQF5 and above. Any amount over this will become part of your taxable income.
The financial assistance should help the recipient expand their knowledge or skills and, therefore may cover the following costs:
- Tuition fees;
- Registration and examination fees;
- Books, equipment and accommodation meals (and meal vouchers);
- Transport from a residence to campus and back.
If you’d like to take advantage of this exemption, discuss the matter with your employer (or relevant HR department). Do note that the legitimacy of the bursary or scholarship will be questioned if you sacrifice a portion of your salary in order to receive the benefit
Tax Tuesday
Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.
