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Four ways to ensure your staff bursaries are tax-free

by , 08 February 2013
Four ways to ensure your staff bursaries are tax-freeSouth African universities go back to work this week as the official varsity calendar gets under way. That's great news if you plan to send a staff member back to 'school' to further his degree or training. After all, doing so means better trained staff and a great tax break for your business too. Here are the SARS' requirements for company bursaries you need to know about...

Employee education is very near to employers' hearts. After all, the more qualified your employees are, the better it is for your business.
 
Now, thanks to a SARS' Interpretation Note released on 1 March 2012, you can help further your employee's education without having to pay tax on the bursary.
 
Here's what you need to do for your staff bursary to get SARS' nod
 
For your staff bursary 'to qualify for the tax exemption, you must pay the institution directly. If your employee pays the fees himself and then claims back from you, you won't get an exemption from tax. You won't be able to get an exemption for study loans either,' explains the Tax Bulletin's Natalie Cousens.
 
Even better, your employee doesn't have to get a degree or diploma at the end of his studies to qualify for tax exemption. Any course (including in-house staff training) qualifies.
 
You can ensure your staff bursary stays out of SARS' tax net by following these four requirements:
 
The Tax Bulletin outlines the following requirements to ensure your staff bursary remains tax-free:
 
#1. Ask your employee to sign an agreement stating that he'll reimburse you for the bursary if he fails to complete his studies for any reason other than death, ill health or serious injury.
 
#2: If the bursary is for an employee's relative, it's tax free up to a maximum of R10,000 per year, per relative. (This tax-free portion only applies if the employee earns less than R100,000 per year.)
 
#3: If you award a staff bursary and your employee retires a few months later, the conditions around the R100,000 remuneration limit (described above) apply.
 
#4. If you hire a new employee who has a bursary from his previous employer, take a close look at his contract with that employer. If it states that he has to pay the company back for the bursary on resignation, you can choose to make the payment on his behalf. This repayment is tax free if you sign an agreement with the employee saying he'll work for you for a specified period of time.
 
Remember to include staff bursaries on your employee's IRP5!
 
Don't forget: If you give an employee a taxable bursary, the amount must be reflected on his IRP5 for tax purposes.
 
Staff training has never made so much sense – not only will boosting your employee's education profit your business in the long run, but you'll also be able to do so tax-free.

If you need more information on IRP5, IRP5(a) and IT3(a) get the Practical Tax Loose Leaf. In the Practical Tax Loose Leaf we've got a dedicated chapter on IRP5, IRP5(a) and IT3(a), in it you'll discover:

  • You must meet these timelines!
  • Three types of employee tax certificates and when to use them
  • 5 situations when you must issue an employees' tax certificate
  • Make sure you include this mandatory info so SARS doesn't reject your tax certificate
  • You must submit your tax certificate electronically – here's how
  • Now you can submit your certificates the easy way

Get your Practical Tax Loose Leaf  here...

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