Here’s how you’ll be affected by the proposed ‘graduate tax’

Leigh Andrews, 11 Feb. 2013

Tags: tax, graduate tax, income tax

As if you’re not already taxed enough – the ANC has proposed a new graduate tax be imposed on everyone who has graduated with tertiary level education. Here’s how the graduate tax will affect you.

At last year’s ANC elective conference in Mangaung, it was announced that a new tax will be imposed on all graduates from higher education institutions, says Fin24.
The tax is intended to bolster the coffers of the National Student Financial Aid Scheme, which, ironically, is expected to play a part in government's plans to introduce free education to all undergraduate students in 2014.
Time lines and the percentage levied have yet to be revealed, but there’s already lots of opposition to the ‘graduate tax’.
It’s being seen as a ‘Robin Hood Scheme’ as the minority of the population has a tertiary level education.
But graduate tax doesn’t make any sense
The latest census report shows that only 11.8% of our population have higher education qualifications and roughly 25% is unemployed, says Andani Thakhathi in MoneyMorning.
That’s why graduate tax could be more detrimental to education in the country, as it will “actively discourage students from entering tertiary level education,” says DA Youth federal leader Makashule Gana.
Sasco opposed the proposal because it embraces the notion that higher education was a private gain for students and “seeks to further exploit the working class such that they don’t break from the poverty cycle,” SASCO president Ngoako Selamolela says on Moneyweb.
On the other hand, the tax could lead to a brain drain.
That’s because “the tax would further diminish the desire of graduates to stay in the country where their skills were needed,” tax director at accounting and consultancy firm BDO South Africa, David Warneke, said on the Mail & Guardian Online.
Especially as “it would mean an extra payment on top of their income tax, at a time when many are struggling to make ends meet,” says Gana.
You’ll be eligible for graduate tax, but you might not need to pay income tax

But if you are a recent graduate, you could save on paying income tax.
That’s because if you earn less than R120,000 annually and your salary structure doesn’t include travel allowances and a retirement annuity benefit, you don’t have to submit a tax return.
Just remember to register with SARS the moment you start earning a salary, regardless of whether you have to pay income tax or not, reminds FSP Invest.

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