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New Simplified Law and Structure Revamp Make Learnership Allowances Worthwhile

Johannesburg, 19th May – Learnership allowances are worthwhile claiming by employers following the recent revamped structures and changes in law, which have taken away the complex way of calculating learnership allowances and have simplified concessions.

This is according to Ron Warren, executive chairman of payroll software company NuQ, who says that Learnership allowances were introduced from the 2003 tax year to provide an incentive in the Income Tax Act to encourage employers to enter into learnership agreements (also known as apprenticeships) to encourage skills development and job creation.

However, he points out that prior to the changes made by the Taxation Laws Amendment Act, 2009, learnership allowance rules were complex and badly defined, and difficult to understand so that many employers felt it was not worth the trouble trying to claim the allowance.

Warren says that the provisions have been radically simplified, and are easy to implement. “Convoluted rules have been replaced by a new section which came into effect in respect of any year of assessment ending on or after 1 January 2010,” he adds.

“In terms of the Skills Development Act, employers who participate in learnership schemes are entitled to refunds of all or a portion of the Skills Development levies that they pay (via SARS) to the SETA they belong to,” Warren says.

“As a further encouragement, they are entitled to learnership allowances that they can deduct from their taxable income, and so pay less tax,” he adds. “These deductible allowances are like deductible expenses that an employer incurs, but the employer does not actually incur the expense.  They are thus phantom expenses, if you like.”

The allowances are claimable in respect of both learnerships registered in accordance with the Skills Development Act, and apprenticeship contracts under the Manpower Training Act, which are entered into before October 2011.  Both are referred to as “learnerships” below.

The length of a learnership may be more than one year, and the learnership agreement must be entered into pursuant to a trade carried on by the employer.

There are two types of allowance claimable – a commencement and a completion allowance.

Warren says that a commencement allowance is payable on completion of each full 12 months of a learnership, and a completion allowance is payable when a learnership is successfully completed. He explains:

Commencement allowance

When a learnership commences, the employer is granted an allowance of R30 000 for the first full 12 month period of the learnership, and a further R30 000 for each subsequent full 12 month period of the learnership.

Where the learner is a person with a disability at the time of entering into the learnership agreement, the allowance granted to the employer is increased by R20 000 (giving a total allowance of R50 000 for each full 12 month period).

The allowance of R30 000 or R50 000 is calculated by reference to the number of full months that the learner has been party to the learnership agreement in a year of assessment. Thus, if the year of assessment is a calendar year and a one year learnership commenced on 1 April, the employer could only claim 9 twelfths of the allowance in the first year and the remaining 3 twelfths in the next year of assessment.

Completion allowance

When a learnership is successfully completed, an allowance is granted to the employer dependent on the length of the learnership.
•    If the learnership agreement was for a period less than 24 full months, the allowance is R30 000.
•    If the learnership agreement was for a period of 24 full months or more, the allowance is R30 000 multiplied by the number of consecutive 12-month periods of the learnership agreement.

Where the learner is a person with a disability at the time of entering into the learnership agreement, the allowance granted to the employer is increased by R20 000 (giving a total allowance of R50 000 for each full 12 month period).  Therefore, if the learner incurs the disability after the learnership has commenced, the additional allowance may not be claimed.

Allowances when a learner changes employment

Warren says that the way in which the Act is worded, intentionally allows for the situation where an employee resigns from the employer with whom a learnership agreement was entered into, and takes other employment, perhaps at a higher rate of pay.  The new employer may assume the learnership, which is permitted by section 17(5) of the Skills Development Act.

If a learner changes employers and the learnership is taken over by the new employer, the commencement allowance is split between the old and new employers based on the number of full months that the learnership was in existence with each employer.   

The completion allowance remains as described earlier, claimable only by the employer with whom the learnership was completed, on successful completion of the learnership – R30 000, or R50 000 if the employee was disabled at the start of the learnership.

If a learner changes employers in the course of the learnership, only the final employer will be entitled to the full completion allowance, including the period of learnership with the first employer, as the original employer has no control over the learner’s successful completion.

Repeated learnerships

No commencement or completion allowance may be claimed in respect of a learnership where the learner previously failed to complete any other learnership agreement, and the new learnership contains the same education and training component as the previous learnership.

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