South Africa | Increase in employment benefits

South Africa’s Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill, published following the 2026 Budget Speech, proposes amendments to certain Income Tax Act exemptions and retirement fund tax deduction limits, effective 1 March 2026.

Legislative summary of changes

Bursaries and scholarships exemption – sections 10(1)(q) and 10(1)(qA) 

• The exemption applies where a bursary or scholarship is granted by an employer or an associated institution.
• General qualifying criteria remain unchanged. A bursary granted to an employee’s relative, with or without a disability, is exempt if:
  • It is a bona fide scholarship or bursary.
  • It is granted to assist study at a recognised educational or research institution.
  • It is not granted under a salary sacrifice arrangement.
  • It does not exceed the prescribed limits.
• Remuneration proxy threshold:
  • Previous position, R600,000.
  • New position, R900,000.
  • If the remuneration proxy exceeds the threshold, the full bursary is taxable.
• Monetary limits where the relative does not have a disability:
  • Basic education, Grades R-12, NQF 1-4
    • Previous position, R20,000.
    • New position, R30,000.
  • Higher education, NQF 5-10
    • Previous position, R60,000.
    • New position, R90,000.
  • Monetary limits where the family member has a disability:
    • Basic education, Grades R-12, NQF 1-4
      • Previous position, R30,000.
      • New position, R45,000.
    • Higher education, NQF 5-10
      • Previous position, R90,000.
      • New position, R130,000.

Qualifying long service awards and bravery awards – section 1(1) definition of “gross income” and Seventh Schedule 

Long service awards: 

• Recognise continuous service with the same employer.
• Exemption limit increases from R5,000 to R16,000.
• The exemption applies to awards in the form of:
  • Cash.
  • Right of use of an asset.
  • Acquisition of an asset.
  • Free or discounted services.
• Qualifying service requirement:
  • An initial unbroken period of at least 15 years, or
  • A subsequent unbroken period of at least 10 years with the same employer.
• The exemption is not automatically triggered at fixed anniversary milestones.

Bravery awards: 

• No fringe benefit value arises where an employee receives a bravery award in the form of the acquisition of an asset.
• Exemption limit increases from R5,000 to R16,000.
• Cash awards do not qualify under the asset-based exemption in the Seventh Schedule.

Occupational death lump sum exemption – section 10(1)(gB)(iii) 

• A lump sum paid as compensation for the death of an employee resulting from a work-related incident is exempt if:
  • The payment is made by the employer.
  • It is over and above compensation under the Occupational Injuries and Diseases Compensation Act.
  • It does not exceed the exemption limit.
• Exemption limit:
  • Previous position, R300,000.
  • New position, R800,000.
  • Only the amount exceeding the applicable limit is taxable.

Retirement fund contributions deduction limit – section 11F 

• Employee contributions to pension, provident and retirement annuity funds qualify for a tax deduction. Total contributions include:
  • Actual employee contributions.
  • Deemed employee contributions, being the fringe benefit value of employer contributions.
• Annual deduction limit:
  • Previous position, the lesser of R350,000 or 27.5% of remuneration.
  • New position, the lesser of R430,000 or 27.5% of remuneration.
  • The 27.5% cap remains unchanged.
• Additional provisions:
  • The limit applies to total contributions across all retirement funds.
  • Remuneration for this purpose excludes severance benefits and retirement fund lump sums.
  • Private retirement annuity contributions may be taken into account where proof of payment is provided.

Fringe benefit exemption on acquisition of residential immovable property – Seventh Schedule 

• No fringe benefit value arises from the acquisition of an asset in the form of residential immovable property where all statutory conditions are met.
• Remuneration proxy threshold:
  • Previous position, R250,000.
  • New position, R360,000.
• Property market value threshold:
  • Previous position, R450,000.
  • New position, R650,000.
• Additional condition:
  • The employee must not be a connected person in relation to the employer.

Both thresholds must be satisfied for the exemption to apply.

Additional information and resources 

• Click here to access the official publication.
• Please refer to release notes PSPDEV-29435 and PSPDEV-294351 titled Calculation changes / Income Tax Act exemptions and Retirement fund deduction limit updates 2026/2027 for more information.

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The Deel Local Payroll Team