Reduce your tax liability through your employer

This can be done by restructuring your salary so that a portion of your salary is paid to you as exempt income i.e. it is not taxable. Please note that this benefit is only available if your remuneration from your employer is R600 000 or less for the tax year.

In order to access this reduction in your tax payable you will need to have a child at school from Grade R to Grade 12 or have a child attending university.

There is a limit of R20 000 per child at school and R60 000 per child at university that may be paid as exempt income. The effects of this structuring are best illustrated by means of examples.

Example 1 – Child at school no salary structuring

• Salary per year: R500 000
• Tax payable: R113 655

Example 2 – Child at school with salary structuring

• Salary per year: R500 000
• Exempt income: R20 000
• Tax payable: R106 455

In this example, the taxpayer has paid R7 200 less tax for the tax year.

Example 3 – Child at university no salary structuring

• Salary per year: R500 000
• Tax payable: R113 655

Example 4 – Child at university with salary structuring

• Salary per year: R500 000
• Exempt income: R60 000
• Tax payable: R92 055

In this example, the taxpayer has paid R21 600 less tax for the tax year.

The types of expenses that may make up the R20 000 or R60 000 are not limited to the actual tuition fees. The following types of expenses may also be taken into account:

1. Registration fees;
2. Examination fees;
3. Textbooks;
4. Accommodation (other than the person’s home);
5. Meals; and
6. Transport.

In other words, if your child’s school fees are R15 000 for the year, you may still be able to claim the full R20 000 as exempt income if there are other expenses related to your child’s schooling that you incur.

Please note that it is vital to keep proof (i.e. invoices) of all expenses incurred relating to your child’s education in case SARS requests proof.

Your employer will need to change your salary codes on your payroll and you will need to enter into a bursary agreement with your employer to ensure that all of SARS’ requirements are complied with.

As an employer, implementing such a structure can have great benefits for your employees. In addition to the reduction in tax your employees will pay, it can also be a means by which you can attract talent to your organisation. You will be able to inform prospective employees that you can reduce their tax liability and thus put more money in their pocket each month.