Tax and SARS knowledge base
When an employer-funded bursary for an employee's child is taxable
When is an employer-funded bursary for an employee's child taxable?
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Direct answer
An employer-funded bursary for an employee's child can be partly or fully taxable in the employee's hands. For the 2026/27 tax year, SARS uses the employee's remuneration proxy and the learner's study level. For a relative without a disability, the exemption does not apply if the employee's remuneration proxy exceeds R900,000. Where the proxy does not exceed R900,000, the exempt amount is limited to R30,000 per relative for Grade R to 12 or NQF levels 1 to 4, and R90,000 per relative for NQF levels 5 to 10.
The amount above the relevant limit is a taxable benefit. If the bursary is funded through salary sacrifice, the bursary is taxable even if the normal remuneration-proxy and study-level requirements appear to be met. SARS treats the taxable portion as an annual payment for PAYE purposes.
This guide concerns a child or other relative of an employee without a disability. Different rules and higher limits can apply to a qualifying family member with a disability where the employee is liable for that person's care and support. That requires careful document review.
What this means in practice
Start with the tax year, not simply the invoice date. The limits above apply to the 2026/27 year, from 1 March 2026 to 28 February 2027. Payroll needs the correct employee, learner and payment information before the benefit is processed.
For example, an employee whose remuneration proxy is within the R900,000 limit receives two school bursaries of R34,000 each for two children. The R30,000 limit applies per child. The total taxable portion is therefore R8,000, being R68,000 less R60,000. SARS's current guide gives this type of example. If the employee's remuneration proxy exceeds R900,000, the full bursary amount for the relative is taxable.
The treatment is not determined by the employer's intention alone. Calling a payment a scholarship, staff benefit or education allowance does not make it exempt. The payroll treatment depends on the statutory conditions, the relevant education level and whether the arrangement contains salary sacrifice.
If the employee is the learner, rather than the employee's child, the rules are different. A study agreement may also contain a repayment condition. Do not use this child-bursary guide as a substitute for reviewing those arrangements.
Step-by-step
- Identify the learner and the benefit. Record the employee's relationship to the learner, the school or institution, the course or school level, the amount awarded and who receives payment. Keep the award letter with the payroll file.
- Classify the study level. For the ordinary relative rule, SARS distinguishes Grade R to 12 and NQF levels 1 to 4 from higher education at NQF levels 5 to 10. Ask the institution to confirm the qualification level if the documents do not make it clear.
- Check the employee's remuneration proxy. For 2026/27, the relative exemption is unavailable if this exceeds R900,000. Payroll should use a documented calculation, rather than a verbal estimate of annual salary.
- Test for salary sacrifice. If the employee gave up salary or another entitlement in exchange for the bursary, record that fact. SARS says a bursary granted to an employee's relative with a salary-sacrifice element is taxable in the employee's hands.
- Calculate the taxable portion. If the remuneration proxy is within the limit and there is no salary sacrifice, deduct the appropriate per-relative exemption. Any excess is taxable. If the proxy exceeds the limit, do not apply the ordinary relative exemption.
- Process PAYE and reconcile. Include only the taxable portion in payroll as an annual payment. SARS's guide identifies different IRP5 reporting codes for taxable and non-taxable school and higher-education bursary portions. Your payroll configuration should be checked before the EMP501 reconciliation.
Documents and records to keep
Keep a bursary policy and the approved award letter. Retain proof of the employee's relationship to the learner, proof of enrolment and the course or school level, invoices and payment evidence. Your file should also show the remuneration-proxy calculation, any salary-sacrifice agreement, the taxable-benefit calculation and the payroll and IRP5 entries.
SARS generally requires tax records to be retained for five years, and longer when they are relevant to an audit, objection or appeal. Clear support matters because payroll needs to explain why a benefit was exempt, partly taxable or fully taxable.
Important limits and exceptions
The R30,000 and R90,000 figures are current for 2026/27, not permanent general allowances. Recheck current SARS guidance for later years. The caps are per relative, and an over-limit payment is not necessarily taxable in full when the employee's remuneration proxy remains within R900,000. It is the excess that is taxable in that situation.
The disability rules should not be applied by assumption. SARS has separate limits and requires the family member to meet the relevant disability and care-and-support conditions. Salary sacrifice also changes the result. In addition, job-related training provided for the employer's benefit is a different category from a bursary for a relative.
When to get tailored advice
Get tailored payroll or tax advice before payment where the scheme is open only to selected staff, uses salary sacrifice, covers a disabled family member, combines bursaries with loans, or pays an overseas institution. A review is also sensible where several family members receive awards or the employee is close to the remuneration threshold.
TaxProof can help organise the bursary documents, payroll evidence and reconciliation records. We cannot determine a learner's tax status or replace advice on a complex benefit arrangement.