temporary allowances

Question 1

What are the income tax implications of learnership agreements with your employees?

Answer 1

section 12H of the ITA
- THERE IS A DEDUCTION for the person (natural or legal entity) that is offering this to their employee
- there are two types of allowances but you cannot deduct both for the same employee in the same year of assessment?
* an annual allowance
> deductible in every year of assessment which the learner to party to the agreement
> if you have a diability and the allowance is for a NQF 1-6, allowance is 60000
> without a disability and studying towards NQF 1-6, allowance is 40000
> if you have a diability and the allowance is for a NQF 7-10, allowance is 50000
> without a disability and studying towards NQF 7-10, allowance is 20000
> it is also apportioned for YOAs less than 12 months
* a completion allowance
> these are deuctible in the YOA in which the learner completes the learnship successfully
> also apportionment (paper 2023 Nov CTA)
> if the learnership was greater or equal to 24 months, YOU CAN MULTIPLY THE ALLOWANCE FOR EVERY CONSECTIVE 12 MONTHS AND
~ you have a diability and the allowance is for a NQF 1-6, the allowance is 60000 FOR EVERY 12 MONTHS
~ without a disability and studying towards NQF 1-6, allowance is 40000 FOR EVERY 12 MONTHS
~ you have a diability and the allowance is for a NQF 7-10, allowance is 50000 FOR EVERY 12 MONTHS
~ without a disability and studying towards NQF 7-10, allowance is 20000 FOR EVERY 12 MONTHS
> if the learnership is less than 24 months then the same rules as above apply but since there is only 1 consective 12 month period, the allowance is only multiplied by ONE

para idk of the 7th sch of ITA
- this is considered a fringe benefit, the value of the fringe benefit is whatever they give you to help fund your learnership fees

Question 2

How does Section 24C work?

Answer 2

Section 24C of the ITA
- the trigger is when there is a receipt or accrual of income under a contract and this income must be used to finance future expenditure that the tax payer will incur in performing their obligations under that contract
- this section gives you an allowance (doesnt remove anthing from gross income) and the allowance is equal to the following formula [(total estimated costs/ total revenue from contract) * income received less any actual expenses incurred relating to that project
- be careful to note when the companies financial year end is because this is also the end of the tax year
- the allowance taken must then be included in the following year of assessment

Question 3

what is the allowance given for credit losses? and for bad debts?

Answer 3

Credit Allowance
Section idk
- 25% of debtors of a certain age?
- 40% of debt over another certain age?
- if deducted in the current year of assessment, must be added back in the following year of assessment

Bad debts allowance
section idk
- all of bad debts