The Tax-Exempt Employee Education Benefit That No-One’s Talking About

The Tax-Exempt Employee Education Benefit That No-One’s Talking About
The Tax-Exempt Employee Education Benefit That No-One’s Talking About

We’re all familiar with pension funds, medical aid contributions, subsidised gym memberships and other employee benefits… but how many employees – and indeed, employers – know that employers can provide their employees with tax-exempt contributions to their families’ education?

It’s no secret that many South African parents struggle to afford school and tertiary education fees. Now, there’s something that the private sector can do about it. Companies can reduce their employees’ educational expenses through an innovative form of tax relief utilising Section 10(1)(q) of the Income Tax Act.  

What is Section 10(1)(q)?

Section 10(1)(q) is a little understood and underutilised piece of national legislation introduced by the government in the early 2000s. It is based on an employer-dependent employee value proposition whereby an employer, if they pay for an employees’, or the relatives of an employees’, school and/or tertiary education fees, can grant a bursary to the employee – and the employee pays no tax for this benefit.  

The direct impact of this legislation is that employees who have this benefit have funds available for school fees – AND they enjoy the tax exemption. The bursary can be used for a relative of the employee (such as their child) or for their own – or continuous – education.

Good as this sounds, those companies that are aware of the benefits of Section 10(1)(q) often shy away from its implementation due to the onerous administration required.

What are the conditions and limitations?  

The following requirements have to be met in order for a bursary or scholarship to qualify for this exemption:

  • The exemption will only apply if the employee’s annual remuneration does not exceed R600,000.
  • The scholarship or bursary must be a bona fide scholarship or bursary.
  • The student or learner must study at a recognised educational or research institution.
  • For school studies or a qualification from a National Qualification Framework (NQF) level 1 to 4, the exemption amount is R20,000. For NQF level 5 to 10 (post-school), the exemption increases to R60,000.

The benefits of employee benefits

Employees who believe that management is concerned about them as a person – not just as an employee – are more productive, more satisfied and more fulfilled. Time and time again, research has proven that investing in employees is a sound investment with high returns, and that satisfied employees lead to satisfied customers and profitability.  

What’s unique about School-Days?  

School-Days takes care of all the compliance and administration in implementing the Section 10(1)(q) employee education benefit.  

We relieve companies of:

  • The administrative burden  
  • Securing the compliance and validation that SARS and BEE legislation requires

Basically, School-Days is a ‘one-stop-shop’ when it comes to implementing this under-utilised benefit. Although there are other organisations out there that administer educational bursary schemes, School-Days is the only one that puts the power in the employee’s hands by giving them other tools to build their bursaries even further – such as the family shopping at partner retailer outlets and/or choosing to make their own contributions. It’s a holistic bursary building platform unlike any other.  

School-Days also helps employees prepare for the future, as they don’t need to name the beneficiary then and there. For example, an employee may want to start building a bursary for the family they plan to have in the future.

As South Africans, we need to work together to provide better educational opportunities for our youth. It’s our aim to give people hope by making education more accessible and more affordable by tying the private sector into the education funding landscape. The way we see it, there’s no reason for employers not to give this benefit to their employees.

Interested in finding out more? Contact [email protected].