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Did you know: If you help Sue pay for her studies, she doesn't pay tax on it?

by , 15 August 2014
It's quite common for companies to pay for their employees to study further. It's a great investment because you can agree that your employee must stay with you for a certain period of time afterwards or she'll have to repay the study costs.

Now normally when you pay employee benefits, she'll have to pay fringe benefit tax. But, with employee study loans and bursaries there's no fringe benefit tax.

Here's why...

You can pay for your employee's studies and she won't pay fringe benefit tax

 
While you can give any employee a tax-free bona fide scholarship or bursary to enable or help him study at a recognised educational institution. This tax exemption comes with certain catches. 
 
For your employee to receive this exemption you must sign an agreement with her. This agreement must state your employee must repay the scholarship or bursary if she doesn't finish her studies for any other reason than death, illness or injury.
 
Without this agreement, your employee will have to pay tax on the loan. 
 
And that's not the only situation that'll trigger the tax on this benefit.
 
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Your employee will pay fringe benefit tax on her scholarship or bursary if she doesn't finish her studies

 
Your employee's tax exemption falls away if she fails to complete her studies. 
 
And if you give your employee's relative a scholarship or bursary, the exemption is limited to R10 000 per year. This is as long your employee's annual salary doesn't exceed R100 000 for the tax year. Otherwise, the exemption falls away and your employee will have to pay tax on that bursary no matter what.
 
There you have it. As long as you stick to these rules you can pay for your employee's studies without adding extra tax to their tax bill.
 

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