(and how to make yours bullet‑proof)
Section 10(1)(q) of the Income Tax Act lets employers fund staff education (or their children’s/relatives) without triggering PAYE, while still claiming a normal business deduction. Get the paperwork wrong, though, and the “bursary” becomes a taxable fringe benefit. Similar deductions are claimable under Section 10(1)(qA) for disabled employees. Its worth pointing out that this deduction is not limited to employees but to any person, providing the rules are followed.
Below is a field‑guide to the rules after this year’s Budget tweaks and the latest SARS commentary.
What the law actually allows
In essence, this section allows an employer to pay or reimburse “bona fide” study costs for an employee or their relatives provided the payment is made in terms of a bona fide scholarship or bursary where the employee signs an agreement to repay the money if studies are not completed for reasons other than death, ill-health or injury. Note this is not necessarily a requirement to repay if the employee fails the exams but rather fails to complete the course. SARS guide adds in the words “successfully complete” thus meaning pass the exams and/or obtain the qualification. SARS are wanting the employee to take their scholarship or bursary commitments seriously.
The two bursary buckets
| Bucket | Who gets the money? | Monetary limits | Extra conditions |
| Open bursary | The employee | No rand cap | Written agreement obliges the employee to repay the company if studies are not completed for reasons other than death, illness or injury. |
| Closed bursary | A relative of the employee | If the employee’s remuneration proxy ≤ R600 000: • R20 000 (Grades R–12 / NQF 1–4) • R60 000 (NQF 5–10) | No salary‑sacrifice may fund the bursary – if pay is reduced to create the bursary, the entire amount is taxable. |
| Disability variant – s 10(1)(qA) | Employee or relative with a disability | Higher caps: • R30 000 (school) • R90 000 (tertiary) | Same proxy and salary‑sacrifice rules apply. |
There are no salary limits for employees, however a bursary to the employee’s child or other relative is exempt only when the employee’s remuneration proxy for the previous tax year does not exceed R600 000 and, even then, only up to R20 000 a year for school-level education or R60 000 for tertiary studies (higher caps of R30 000/R90 000 apply where the learner has a disability). The limits are applied for each relative and thus an employee funding 3 children could obtain up to R60,000 in total.
SARS accepts as valid study expenditure tuition, registration and examination fees, prescribed books, compulsory equipment and—in limited cases—accommodation, meals and daily transport that are an integral requirement of the course;
Casual allowances, retrospective reimbursements and salary-sacrifice funding are disallowed and turn the bursary into a taxable fringe benefit. Crucially, SARS interprets “bona fide” to mean the bursary must have a genuine educational purpose, be documented in writing, stipulate the course and institution, and bear no element of disguised remuneration or reward for past services.
Budget spotlight on the “remuneration proxy”
The remuneration proxy is the employee’s total package in the preceding year of assessment. Budget 2025 plugged a loophole: from 1 March 2026 it will include any foreign‑employment income that was previously exempt under s 10(1)(o)(ii). Globally mobile staff who used to sneak under the R600 000 line may now breach the cap and lose the relative‑bursary exemption.
Beware of the “salary-sacrifice”
A salary‑sacrifice i.e. any reduction in salary (whether past or current) will nullify the exemption (but the company may still deduct the cost). SARS are giving a deduction for genuine education, made in good faith and not disguised remuneration.
Grey areas clarified by Interpretation Note 66
- Qualifying spend – bursaries may cover accommodation, meals or transport only when linked directly to the course.
- The caps relating to relatives are per relative and not per employee.
- Paying for someone to conduct research is not covered by this section, unless it is a payment to study at a “recognized research institution”.
- Retired employees are subject to the remuneration caps due to the definition of employee
- Professional exams & CPD – employer‑funded, job‑related short courses given on‑site draw no fringe‑benefit value under para 10(2)(c) of the Seventh Schedule.
- Study loans vs bursaries – interest‑free study loans are tax‑free as opposed other interest free or low interest loans above R3000 which are considered a fringe benefit and attract PAYE. However, if the loan is later written off the amount becomes a taxable benefit or if the benefit is revoked and remains unpaid, the amounts will be considered a taxable fringe benefit.
Building a rock‑solid bursary policy
- Ensure that your policy includes the words “bona fide” and incorporates policies which include the learning objective, institution and cost items covered.
- Include the repayment clause for employee bursaries—non‑completion, non‑exemption.
- Track the remuneration proxy – and ensure that employees do not breach the R600 000 after the foreign‑income inclusion.
- Prohibit salary trade‑offs – fund bursaries from the training budget and not from CTC reductions.
- Keep evidence – invoices, proof of registration, academic results, signed agreements.
Bottom line
Done properly, an employer bursary is still South Africa’s most efficient staff‑development spend: the employee avoids PAYE, the company lands a full deduction, and SARS’s latest guidance shows the door remains wide open—provided the bursary is truly bona fide, the paperwork in place, and the remuneration‑proxy test passed.
