A PBO donation through payroll is a deduction an employee elects to have taken from their pay and paid to an approved public benefit organisation. Done correctly, it gives the tax relief of a Section 18A donation immediately rather than on assessment.
What it means
Where the organisation is approved for Section 18A and issues the necessary receipt, the employer can take the donation into account in the PAYE calculation, reducing the tax withheld in the period. This is more convenient than the employee claiming the deduction later on assessment, and it is capped, like all Section 18A donations, at 10% of taxable income.
Where it fits in
A PBO donation is a deduction component: it reduces net pay and, where Section 18A applies, the PAYE base. The amount is paid over to the organisation and reported under the relevant IRP5 source code, with the receipt supporting the deduction.
Key rules
- An employee donation to a PBO deducted through payroll.
- Reduces PAYE in the period where the PBO is Section 18A approved and issues a receipt.
- Capped at 10% of taxable income, like all Section 18A donations.
- Paid to the organisation and reported under the prescribed source code.
