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Did you know: Your company doesn't have to pay tax on study loans and bursaries!

by , 21 January 2014
Study loans and bursaries fall under the type of fringe benefits you can give to employees, tax free! That's right. There's no tax payable on study loans and bursaries. BUT, there's a catch...

According to the Practical Tax Loose Leaf Service, any bona fide scholarship or bursary you give to your employee to help him study at a recognised educational or research institution is tax-free.

This is contained in Section 10 (1) (q) of the Income Tax Act).

But as we've mentioned, there's a small catch.

Study loans and bursaries will be tax free under these circumstances

Caution! For this exemption to apply, you must sign an agreement with your employee saying that he'll reimburse you if he fails to complete his studies for reasons other than death, ill health or injury.

In fact, if your employee fails to complete his studies, the exemption falls away!

Just remember that if you grant a scholarship or bursary to your employee's relative, the exemption is limited to R10 000 per year, provided your employee's remuneration doesn't exceed R100 000 for the relevant tax year.

If your employee's remuneration does exceed R100 000, then the exemption doesn't apply at all!

Don't forget that not all fringe benefits are tax free.

A fringe benefit will be taxable if you:

  1. Give your employee an asset for free, or for a price that's lower than its value;
  2. Let your employee use assets owned by you (other than a company car);
  3. Give your employee a company car for his private use;
  4. Give your employee free meals, refreshments or meal vouchers;
  5. Provide free or cheap accommodation for your employee;
  6. Provide free or cheap services for your employee; and
  7. Provide low interest or interest-free loans for your employee.

Well there you have it. If you gave one of your employees a study loan or bursary this January, you'll be glad to know it's tax free.

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