IN a bid by government to encourage the upskilling of labour in all sectors of the economy, employers are being actively encouraged to enter into learnership agreements by making these agreements decidedly more attractive from a tax point of view. This boost for employers should lead to the registration of more learnerships, given the generosity of the concessions if they are enacted.

David Warneke, a tax partner at Cape Town’s Cameron and Prentice chartered accountants, explains that a learnership agreement is one registered as such with a SETA (Sector Education and Training Authority), or a registered apprenticeship.

“At present, if a three-year SETA-based learnership is entered into with a learner without a disability, the employer qualifies for two tax deductions: the first in the tax year in which the learnership is entered into, with a maximum amount of R30 000 and the second in the tax year in which the learnership is successfully completed, also with a maximum amount of R30 000. Thus there is a total maximum of R60 000 of deductions available for the employer. Under the new dispensation the employer will qualify for a R30 000 tax deduction or each year of the learnership and in addition there is a completion allowance of R30 000 multiplied by the number of years of the learnership agreement is available on successful completion (i.e. R90 000, making a total of R180 000 of deductions available).”

“Where the learner is a person with a disability, the amount of R30 000 is increased to R50 000, escalating the total deductions available to R300 000.”

Warneke further explains that at present, if the employment of the learner is terminated prior to successful completion due to any reason other than death or physical incapacitation of the learner, the R30 000 initially deducted has to be added back in the tax computation of the employer.

Under the new dispensation the R30 000 allowances granted in years prior to that in which the learnership agreement is terminated, will not be added back. Instead, if the learnership is cancelled halfway through the employer’s tax year, the employer will qualify for a tax deduction of R15 000 for that year (i.e. half of a full year’s deduction). A new employer, taking over the learnership agreement from the same date, would be entitled to the remaining R15 000 deduction for that tax year and deductions of R30 000 for each of the remaining years in the learnership agreement.

“The new employer would be further entitled to the full completion allowance of R90 000 if the learnership is successfully completed,” says Warneke.