Bursary paid to employee for studies

[J7J]

Hi,

So I have been reading up on this and I would just like to confirm my understanding about the tax implications regarding a bursary paid to employee for studies.

The bursary is exempt income in the hands of the employee receiving the bursary (section 10(1)(q)). So no tax is payable by the employee on the amount received.

But, what I am not 100% sure of is whether the bursary is tax deductible in the hands of the employer paying the bursary?

Please comment. Thanks!

[Dave A]

Surely it would be treated as a training expense?

[Christel]

I think it is deductible for the employer. There must be a document on the SARS website that states this..... I'll check for you.

[Mark Atkinson]

Hmmm... There is an allowable deduction for tax purposes if the bursary forms part of a registered learnership agreement.

It sounds like it may be a little more informal than that, however, so you'd have to review it in terms of S11 (a) - the general deduction formula.

If it is in the production of income you can probably deduct your actual expenditure. So if the bursary is in place to help the employee better perform his/her duties in your organisation, then it could be construed to be in the production of income.

Also just be careful of assuming the bursary is tax free in the hands of the employee. There are provisos to that exemption. (E.g. Salary less than R100 000 if I recall correctly + one or two others.) I can check when I have access to the Income Tax Act again.

[CLIVE-TRIANGLE]

It is tax free if:
It is to an employee or employee's relative, and;
The employee's salary does not exceed R100,000, and;
The bursary does not exceed R10,000 per annum. If it does, the excess is taxable.

And yes, it is deductable

[J7J]

Thank you very much for everybody's input. Really appreciate it!