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Thread: Pastel Payroll - Scholarship/Bursary: Section 10(1)(q) of the Income Tax Act.

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    Pastel Payroll - Scholarship/Bursary: Section 10(1)(q) of the Income Tax Act.

    Hi,

    So we want to structure the qualifying employees' salaries from Oct 2019 to benefit from the Section 10(1)(q) of the Income Tax Act exemption for scholarship / bursaries to employees and family of employees.

    Pastel Payroll does not want to assist with the technical application of this rule, so please help :-)

    Say an employee has 3 children at school, ie. the employee qualifies for R20,000 x 3 exemption per year. So we are unsure of the following:

    1) Does this R20,000 per child exemption have to be spread over 12 months (R1,667 x 3 per month) or can you put the full R20,000 x 3 down in one month? So if you only start using this exemption now in Oct 2019, do you have to spread the R20,000 x3 over the remaining 5 months (R12k per month) or do you lose the portion of the exemption for the 7/12 that you did not apply this exemption?

    2) Do you then reduce the basic salary with the amount shown under scholarship / bursaries or leave basic the same and only put scholarship/bursary under the seperate code? Ie. Say the basic was R20,000 before applying this exemption, will the basic now reduce to R15,000 and then under the code for scholarship R1,667 x 3 (R15k)?

    Thank you in advance.

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    Hi J

    I an not a tax practitioner - or providing any professional service in this post - just advice - use it at your peril

    The bursary amount / exemption if for the tax year. It is not a pro-rata transaction. You can apply the amount as a lump sum, or monthly.

    I couldn't find a way that seemed to work in Pastel Payroll using their codes. If you only add the 6165 benefit, there don't appear to be any changes to the PAYE deduction. If you decrease the basic salary by the bursary amount, they are short paid. This would work if you as a company then paid the educational institution directly. Hopefully someone can add other input here. What we did last year was reduce their basics by the amount of the bursary. We then added 5760 Other Non-taxable allowance to their income for the same value. We also added the 6165 benefit for the bursary value, to justify the 5760 ONTA amount on the IRP5's. We didn't have exceptions when submitting to SARS, so I think that way works.

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    Silver Member Christel's Avatar
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    Hi there, in order for the employee to get this "bursary" the Employer MUST pay over the amount directly to the school.
    You cannot add another income code like 5760 onto the payslip and still let the employee get the benefit of the reduced tax.
    so yes, you will decrease the gross basic income with the amount (once off/ or split over a few months = total of R20 000 per tax year) and add code 6165 to the payslip.
    always fear when Christel is near....

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