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Budget 2014: How to treat employer-provided bursaries in your payroll

Minister Gordhan's budget speech in February this year changed the way you need to deal with employer-provided bursaries in your payroll. Sonika van Wyk: legislation business consultant at CRS Technologies says that previously, if an employee earned over R100 000, the first R10 000 was tax free. Now, the threshold for tax-free benefits has changed.

At the moment, if your employee earns over R250 000 and they study a qualification between NQF levels 1 and 4, the first R10 000 is tax free. However, if they choose to study a qualification between NQF levels 5 and ten, the first R30 000 will be tax free.

Sars measures this tax-free sum based on worldwide income – not merely the remuneration you give the employee for services rendered.

"What this means," says Van Wyk, "is that you might need to take the time to explain to an employee – to who you want to give a bursary to further his education – that you need to make 100% sure that he is not earning above the threshold because if Sars finds that he is earning above the threshold – as at the date of assessment – they'll come down hard on him."

On-the-job training, or courses presented by another institution on your behalf, is not a taxable benefit for the employee. However, this is provided that the training in job related and will ultimately be to your benefit.

What bursaries and study loans will be taxed as a fringe benefit?

  • When you don't require the employee to repay the loan. "This is seen as a taxable benefit for Sars purposes," says Van Wyk.
  • If you reward an employee, e.g. for obtaining a qualification, this reward is a taxable fringe benefit.

"Remember that low-interest, or interest-free, loans you give one of your employees to further their studies are not regarded as bursaries but low, or interest-free loans. No value is placed on these. You will need to deduct employees' tax from the taxable portion of a bursary that you pay to an employee or one of their family members.

"If you enter into a written agreement where, for example, you agree to give one of your employees a bursary in exchange for him passing the course and if he doesn't hold up his end of the bargain he will have to repay the study monies, treat the amount you paid for his studies as a bona fide bursary until you decide to invoke the conditions of your agreement," concludes Van Wyk.


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