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Can you get a s18A donation deduction on the payment of a relative’s school fees?

Tuesday, 12 May 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: I have a client who would like to claim his contribution to his nephew’s varsity fees as a donation.  Is this an allowable deduction? I am of the opinion that it is not, as it would be the same as having to pay for school fees. Please advise.

From the SARS website:

What does not constitute a bona fide donation for purposes of section 18A?

The following examples do not constitute a bona fide donation: The donation of services rendered such as a professional person providing a voluntary service or renders his skill free of charge. An amount paid for attending a fundraising dinner, dance or charity golf day. The amount paid for the successful bid of goods auctioned to raise funds by an organisation. Memorabilia, paintings, etc, donated to be auctioned to raise funds. Amounts paid for raffle or lottery tickets. Amounts paid for school fees, entrance fees for school admittance or compulsory school levies. Value of free rent, water and electricity provided by a lessor to the lessee which is an approved PBO. Payments in respect of debt due by an entity approved in terms of section 18A. An example would be the cost of repairs to a vehicle paid on behalf of the PBO. 

A: The reference in the part that you copied from the SARS website (Amounts paid for school fees, entrance fees for school admittance or compulsory school levies) is not at all relevant to the question at hand.  It is merely an example of amounts paid that would not constitute a donation and then also for section 18A purposes. 

We agree that the principle (payment of varsity fees) is the same, but whether or not it is a donation is irrelevant unless the section 18A deduction is considered.  From the extract it is clear that the entity will not be able to issue the client with the required section 18A receipt in respect of the "varsity fees”. 

The deduction would only be possible if it meets the requirements of section 11(a) read with section 23(g).  To provide guidance on that we need to know what trade the client is engaged in and what the purpose of the expense was.  The essential requirement is the in production of income one.  We accept that section 23(m) does not apply.  

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.



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