School fees can be claimed as a tax deduction in specific circumstances only, and parents who try to claim fees as a donation face being penalised by the South African Revenue Service (SARS). This warning comes from Richard Rogers, the director of Bendels Consulting, a tax firm that specialises in disability tax law.
Rogers says some private schools are issuing parents with section 18A certificates to the effect that the fees they paid were a donation to the school.
Section 23 of the Income Tax Act prohibits you from claiming a tax deduction in respect of domestic or private expenses or costs incurred in the maintenance of your family. The fees you pay for your child’s schooling are an example of the type of private expenditure that is not tax-deductible, Rogers says.
The Act allows you to claim certain donations as a tax-deduction. To claim the deduction, you must be able to present SARS with a section 18A certificate issued by the organisation as the receipt for your donation. There is also a limit on the donations that you may claim in a particular tax year; the excess amount in a given tax year should qualify as a deduction in the succeeding year.
Rogers says that a donation is a gratuitous disposal by you, the taxpayer, out of generosity or liberality. You should be impoverished by the donation, and the recipient enriched. A donation is voluntary and given freely. The recipient should have no reciprocal obligation to you, and you should have no personal benefit from the donation.
The payment of your child’s school fees is not a gratuitous act for which you expect nothing in return. In terms of the agreement with your child’s school and in return for the fees paid by you, the school has an obligation to provide your child with tuition and to make certain facilities available to your child, Rogers says.
He warns that claiming your child’s school fees as a donation could result in SARS imposing penalties in terms of the Tax Administration Act.
If, in addition to your child’s school fees, you make a gratuitous donation to a school, you should be entitled to receive a section 18A certificate, provided the school has met the legislative requirements to be able to issue such certificates.
The school must formally apply to the SARS Tax Exemption Unit for approval to issue section 18A receipts for donations received, and it may issue such certificates only from the date the unit has confirmed that the school qualifies and has issued it a reference number, Rogers says.
Fees paid to a special-needs school could qualify for tax relief if your child has a physical impairment or a disability as defined in the Income Tax Act, Rogers says. In these circumstances, you can take your child’s school fees into account for tax purposes, subject to certain limitations.
However, the fees paid for your child to attend a special-needs school are not a donation and, as such, the school should not issue you with a section 18A certificate.
Rogers says the special-needs school should prepare a standard tax certificate that confirms the total tuition fees paid by you during the relevant period. It is also necessary to have an ITR-DD (confirmation of diagnosis of disability) form completed to confirm that you are entitled to the tax relief.
He says you might be able to claim other expenses incurred in consequence of a disability, and you should seek professional advice in this regard.
TAX REMINDER
You have until Friday, November 27, to file your 2015 tax return with the South African Revenue Service (SARS) if you are a non-provisional taxpayer, you must file your return (or ITR12) on eFiling (using the eFiling platform or electronically with the assistance of an official at a SARS branch). Provisional taxpayers have until Friday, January 29, 2016 to submit their returns.