Tax Law Amendment Bill (TLAB) of 2020

From March 2006 the rules regarding the implementation of a bursary scheme for employees, and relatives of employees, were changed in order to accommodate the use of a salary sacrifice mechanism to assist employees from a tax perspective. This method was widely adopted and was seen by employers as a very useful facility to assist employees to further educate themselves as well as their relatives.

In recent years this method has come under scrutiny, and it has become clear that the fiscus, in many instances, has been losing tax revenue as a result of employers reclassifying income already accrued to the employee. As such it was proposed in the TLAB of 2020 that from March 2021 this method of facilitating a bursary be discontinued. The proposal has now been promulgated, which means:

• from March 2021 if the employee’s remuneration (their package) includes bursaries or scholarships as an element of salary sacrifice – i.e. as part of their Cost to Company (CTC) then the exemption is not allowed. As suchthe exemption would therefore not apply if the bursary was granted subject to an element of salary sacrifice 

• the exemption would only be available if the bursary granted by the employer is not restricted to relatives of employees, but is an open bursary scheme available to members of the public

• the employer deduction in relation to bursaries would only be available if the bursary granted to the employee’s relative is not subject to an element of salary sacrifice

It’s therefore important that Employers who have existing bursary schemes in operation which do include an element of salary sacrifice, or those employers wanting to implement a new bursary scheme for their employees, review these schemes and get some advise to ensure they are compliant going forward.

It will mean having those awkward discussions with affected employees!!