Fee discounts for staff children: tax questions
What a South African school should check before giving staff discounted fees for their children, and how the discount is recorded and reported.
By Achekam · · 5 min read · For Education businesses in South Africa
Discounted fees for teachers' children are one of the most valued benefits a school can offer. They help attract staff, keep families together on one campus, and cost the school less than a salary increase would.
What is less often settled is the tax side. A discount that an employee receives because of their employment may be a fringe benefit, and if it is, the school as employer has duties to work out its value, show it on the employee's tax certificate and declare it to SARS. Get that wrong and the penalty falls on the school, not the teacher. This article sets out what is published on the question and what the school must do either way.
ISASA's advice to member schools
The Independent Schools Association of Southern Africa (ISASA) has advised its member schools on the income tax implications, under the Income Tax Act No. 58 of 1962, of giving staff members, including their family members or close relatives, discounted tuition fees. Its advice rests on a 2010 tax opinion that was updated by a further legal opinion in 2024.
The advice itself sits in a members-only memorandum, so its conclusions are not public. Two practical points follow:
- ISASA member schools should obtain the memorandum and read it with their tax adviser before the next school year.
- Other schools should not assume what it says. The existence of a 2024 opinion is a reason to review the school's position, not evidence of what that position should be.
Whether a staff discount is taxable, and how it is valued, may depend on how the scheme is designed: who qualifies, how large the discount is, and whether it is open to non-staff families on the same terms. Those are questions for a registered tax practitioner.
SARS's rule: the employer works out the cash equivalent
Whatever the answer for a particular scheme, SARS is clear about whose job the calculation is. Its fringe benefits guide says the employer must determine the cash equivalent of each taxable benefit and show its nature and value on the employee's IRP5/IT3(a). The guide adds that failure to do so can attract a penalty of 10% of the cash equivalent or of the amount understated.
SARS's guide for employers in respect of fringe benefits explains how taxable benefits are identified and valued, and the employer's reporting duties. The page was last updated on 11 May 2026; check it again before each tax year.
So the school cannot leave the question to the teacher. If a discount is a taxable benefit, the school must value it and report it, and it is the school that pays the penalty if it does not.
The EMP501 declaration
SARS's guide also says the employer's declaration that all taxable benefits are included in employees' certificates forms part of the annual EMP501 reconciliation. When the school submits its reconciliation, it is confirming that every taxable benefit is on the certificates. A school that has never considered its staff fee discounts is making that declaration without knowing whether it is true.
Recording the discount against the fee invoice
Whatever the tax answer, the discount itself must be visible in the fee records, so the school knows what each staff family was charged and what it gave up.
In Achekam, a business creates customer invoices as drafts it can change or delete, and issuing one takes the next number in its sequence and posts it to the ledger. Default terms are 30 days. Two approaches work:
- Invoice at the discounted amount, showing the full fee and the staff discount on the invoice, so the value of the discount is recorded on the document itself.
- Invoice the full fee and credit the discount. A credit note is issued from the invoice it corrects, in full or for chosen lines, posted to the ledger, and can be downloaded as a PDF or e-mailed, with leftover credit held for the customer. There is no credit note without an invoice. If the fee is invoiced in lines, such as one per term, the discount can be credited line by line.
Either way, post the discount to its own account, such as "Staff fee discounts", rather than netting it silently against fee income. That gives the school a total for the year, by family, which is the starting point for any cash equivalent calculation. Bursaries funded by others are treated differently; see bursaries that reduce fees.
Showing benefits on certificates and the EMP501
On the payroll side, year-end IRP5 and IT3(a) certificates in Achekam are prepared from issued payslips and download as PDFs, and a certificate cannot be issued while an employee's ID or tax number is missing. That means a taxable benefit only reaches the certificate if it has been on the payslips. If the school's adviser concludes the discount is taxable, agree with them how its value will be included in the monthly payroll, rather than trying to add it at year end.
The EMP501 reconciliation shows month by month what was deducted, declared and paid, and what went onto the certificates, and produces the certificate file that SARS e@syFile Employer imports. Review it with the fee discount question in mind before signing the declaration. IRP5, IT3(a) and the EMP501 covers the reconciliation process.
Questions to settle before the school year starts
Take these to the school's tax adviser:
- Is our staff fee discount a taxable benefit, given how the scheme is designed?
- If so, how is its cash equivalent worked out, and does it differ for children, relatives and spouses?
- Does the answer change if the discount is open to other families on the same terms?
- How should the benefit be included in monthly payroll?
- If past years were not reported, what should the school do now?
Diarise a meeting with the tax adviser before the new school year's invoices and payroll are set up, and take this list with you.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
