Donations and scholarships – how this can reduce your tax bill!

Recent draft law has proposed the following 2 changes which can reduce your tax bill when effected by SARS:

• Donations to Public Benefit Organisations

In the past, your donations to Section 18A (S18A) organisations were included in the annual exemption for donations tax purposes (individuals only). These S18A donations are now over and above the current R100 000 donation exemption available for individuals.

Your S18A donations  for tax claim purposes were also limited to 10% of your taxable income in any one tax year, with any excess being lost. The new proposal will now allow for the roll-over of the excess into the next tax year so that the tax benefit is not lost forever! 

•  Bursaries to Employee relatives

An income tax exemption exists for ‘Bona Fide’ bursaries or scholarships granted by an employer to an employee or relatives of its employees. The employee will not be taxed on these amounts in their personal capacity if specific rules are complied with – ie mandatory repayment if an employee fails to complete their studies for reasons other than death, ill-health or injury.

For relatives of employees there are further rules applicable:

–  the employee’s annual salary limit may not exceed R200 000 in any tax year

–  The monetary limit for bursaries/scholarships for studies up to and including NQF4/ Matric/Grade 12 is R10 000 per year

–  The monetary limit for bursaries/scholarships for further studies after NQF4/Grade 12 is R30 000 per year 

These proposals are expected to be effected from 1/3/2014 onwards.