An employer incorrectly taxed an employee (the taxpayer) on a subsidiary bursary allowance using taxable code (3820), due to the employer using the taxpayer’s 2019 (last year of assessment) proxy remuneration as per the Employer PAYE Guidelines. However,
Author: The Payroll Authors Group of South Africa
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Due to the fact that the taxability of the benefit is based on the definition of remuneration proxy, the fact that the remuneration proxy for the current year is lower for the preceding year does not have an effect on this taxability.
Remuneration proxy is defined in section 1 of the Income Tax Act - In relation to a year of assessment, means the remuneration, as defined in paragraph 1 of the Fourth Schedule, derived by an employee from an employer during the year of assessment immediately preceding that year of assessment…
This means that the taxability of the Bursary benefit was correct if it was based on the remuneration proxy for the preceding year.