Save taxes on school or tertiary fees for your children
We get asked the question quite a lot if you can't save some taxes on school or university fees fees? We have some good news
We get asked the question quite a lot if you can't save some taxes on school or university fees fees? We have some good news. With some proper planning and structuring you might get a bit of relief for yourself (as director/member earning a salary) and/or your employees through ways of a bursary from the employer.
There are restrictions that apply though to qualify:
1. Only children from grade 1 upwards (up to Tertiary education) can qualify for a bursary. If the child is not in grade 1 yet, please make a note as you can qualify in future.
2. Remuneration of the employee (director as employee of the company) may not exceed R600 000 per tax year.
3. Employee agrees to reimburse the employer for any scholarship or bursary granted to him/her if he/she fails to complete his/her studies for reasons other than death, ill-health or injury.
The tax saving will arise from the employee/director/member receiving a tax free bursary of up to R20 000 (R60 000 per year for tertiary students) per year (R1 667 per month) per child through payroll from the company as employer.. Also see practice example and the end of this e-mail, tax saving can be anything between R3 000 and R20 000 per child per year, depending on your effective annual tax rate as well as your child's institution (school or tertiary)
By way of example, John earns a gross monthly income of R15 000, or R180 000 for the tax year. He has one child at school whose school fees
amount to R18 000 per year. By restructuring his salary in terms of Section 10(1)(q), the tax deduction would afford him an after-tax amountof R3 404.64 in the tax year. This would be calculated as follows: