Tag Archive: Rob Cooper


In the 2013 Budget speech, Finance  Minister, Pravin Gordhan, emphasised that one of Government’s most pressing development challenges is to expand work opportunities for young people: “There has been extensive debate on how this should be done and the answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.”

Learnerships help young people to obtain a formal qualification, while gaining relevant workplace experience. While there are many benefits to the prospective learners, there are also advantages to the employer implementing the learnership. Employers have the peace of mind that their employees are not away from the office for extended periods of time and while they are away, they are improving their relevant work based skills to be more productive and efficient at what they are employed to do.

In 2002, the Government introduced a Learnership Allowance Incentive, for employers to:

  • Encourage job creation by reducing the cost of hiring and training employees through learnerships
  • Promote skills development
  • Encourage human capacity development

However, there is a very specific legislation that guides the process and it poses certain challenges. Tax Talk spoke to Rob Cooper, tax expert and Director of Legislation Updates and Proposed legislation at Sage VIP, part of the Sage Group plc, about some of the recent changes made to the Learnership Allowance Incentive.

Cooper says: “To encourage employers to participate in learnerships, an allowance in the form of a deduction from the company’s taxable income has been available for many years. To qualify for the learnership allowance, employers must register the learnership with SETA. There is a R30 000 allowance at the start of the learnership, and a further R30 000 upon the successful completion. The value of the actual incentive has always been influenced by the when the learner is registered and the learner’s failure to complete. However, with new legislation introduced in January, the scenario will change.”

Cooper explains: “In the past, the allowance (deduction) was only allowed during the year in which the learnership agreement was officially registered with SETA.  For a variety of reasons, registration often takes a couple of months and this resulted in reduced value.”

“In future, employers will no longer have to register learnerships from the moment of the inception. A learnership will be deemed to have been registered for the duration of the agreement that falls within the employer’s year of assessment. However, it is necessary that the learnership is registered within 12 months after the year of assessment.”

“The second issue relates to failure to complete. In the past, the allowance was not granted if the learner previously failed to complete a prior registered learnership of similar nature to the new learnership.  Typically, the employer was not aware of prior learnerships (i.e. the information was not easily accessible or the quality of the information was not reliable, as it is dependent on feedback from other employers). Attempts to obtain this information also delayed the registration process.”

“In future, employers will no longer have to find out details of the individuals’ learnerships entered into with other employers.  Learnership allowances will only be refused if the learner failed the same type of learnership with the same employer (or associated institution).”

”Implementing a learnership programme within your company will definitely contribute to job creation, especially for young people. However, it is important to keep track of all the legislative changes.  Make sure that your company is operating within the parameters of the basic conditions of employment and its legal requirements. It is crucial to being a responsible citizen,” concludes Cooper.

For more information, employers are invited to attend the Sage VIP, Payroll and Tax Seminar. You can book your seat at:  www.vippayroll.co.za.

Rob Cooper is a tax expert and Director of Legislation Updates and Proposed legislation at Sage VIP, part of the Sage Group plc. 

Rob Cooper

Rob Cooper

“Changes proposed to South Africa’s Basic Conditions of Employment Act (BCEA), Labour Relations Act (LRA) and Employment Equity Amendment Bill (EEAB) will have a significant impact on how employers conduct their business in 2013,” says Cooper.

“In the draft Employment Equity Amendment Bill (EEAB), specific attention should be paid to the concept of equal pay for work of equal value, which can result in a new form of unfair discrimination.”

Cooper explains: “In cases where employment conditions, including remuneration, are applied differently to employees who do the same or similar work, then the employer must be able to show that the differences are based on fair criteria such as experience, skills, responsibility and qualifications. If the employer cannot do this, the differentiation would constitute unfair discrimination.”

“In practice it would mean that if a company employed factory workers on a permanent basis and at times of high demand took on additional workers from a labour broker and they worked side by side doing the same job, then both permanent and labour broker-supplied workers must be paid at the same rate,” says Cooper.

“Because the employer must pay the labour broker his fee on top of the wages for the workers, the result will be that brokered labour will cost more than permanent labour. This is logical and the premium that the employer must pay for flexibility.”

“Importantly, the intention is to align the Employment Equity Act with other general labour laws that need to be applied in cases where an individual supplied to a client by a labour broker is seen as an employee of that client.  One can only assume at this early stage that these employees, supplied by the labour broker, will have to be included in the client’s equity plan as well as in the labour broker’s equity plan.”

“The draft Employment Equity Act further changes the way in which companies implement affirmative action. According to Cooper, the groups of people who benefit from the affirmative action provisions will be limited to those who were South African citizens before democracy (April 1994) or to those who were prevented by the policies of apartheid from becoming citizens before 1994, and their descendants. This means that the employment of foreign nationals or those who became citizens after the democratic era (April 1994), will not assist employers to meet their affirmative action targets.”

Employment Services Bill

According to Cooper, the Employment Services Bill is another very important piece of legislation for employers to be aware of as it moves towards finalisation.

“The overall intention of this brand new piece of legislation is to empower the Department of Labour to provide a comprehensive range of employment services (free of charge) to members of the public in an attempt to achieve the Government’s objectives of: more jobs, decent work and sustainable livelihoods.  Any initiative that reduces unemployment is to be welcomed,” says Cooper.

The Government is aiming at making employment services open and accessible to all. This includes the following:

  1. Registering work vacancies and seekers, matching resulting opportunities, and facilitating the placement of seekers with employers or other work opportunities.
  2. Provision of advisory services for training, social security benefits, dealing with vulnerability, vocational and career counselling, assessment of work seekers to determine suitability, and improving work-related life skills.

UIF (Unemployment Insurance Fund) legislation

Changes to the UIF legislation have been pending for quite some time and will hopefully move through Parliament towards the end of this year.  Broadly, the proposed changes envisage increasing the value of the UIF benefit, as well as extending the grace period during which benefits can be claimed, from 6 to 18 months,” says Cooper.

He says there is also an intention to remove certain exclusions of which there are no details but hopes that this will include the exclusion of commission from the remuneration on which the contribution is calculated, which results in commission being excluded from the value of the contribution and the benefit.  Unemployed people, who were earning a low basic salary plus commission, are negatively affected by a benefit that is in line with only their basic salary.

Cooper is encouraging employers to attend Sage VIP’s Payroll and Tax Seminar in March and April 2013. “The seminar is regarded by many as a definitive guide to the changes in payroll and tax legislation and we endeavour to present it in a practical and interactive manner that does not focus on the legal aspects alone. The presentation will also aim at communicating future trends that will impact payroll and HR,” said Cooper.

The annual budget speech delivered by the Minister of Finance is often viewed with a healthy dose of foreboding by payroll administrators across the country. Sage Pastel Payroll and Sage VIP, regarded as experts in the field of HR and Payroll, will collaborate and embark on a countrywide roadshow during March and April 2013 at various venues throughout South Africa to provide guidance and support to payroll and tax practitioners and financial personnel. The seminar will be presented by Rob Cooper, a payroll tax expert at Sage VIP and part of the Sage South Africa.

“The seminar is regarded by many as a definitive guide to the changes in payroll and tax legislation and we endeavour to present it in a practical and interactive manner that does not focus on the legal aspects alone. The presentation will also aim at communicating future trends that can impact on payroll and HR officers,” said Cooper.

Topics to be covered at the Payroll and Tax Seminar will include:

  • A comprehensive review of the 2013/14 Budget Speech
  • Proposed changes and new legislation in Tax Administration
  • Possible impact of changes on businesses
  • How to be compliant with the legislation and remain one step ahead as a Company

Attendees will also take home a comprehensive, yet practical workbook for later reference.

Dates and Venues:

1, 20, 27 March: Sage Conferencing (Woodmead, Gauteng)

4, 12 March, 15 April: Emperors Palace (Boksburg, Gauteng)

5 March: Quest Conference Centre Vanderbijlpark

6 March: Windmill Casino (Bloemfontein)

7 March: CSIR Gauteng (Pretoria Gauteng)

8 March: Silverstar Casino (Krugersdorp)

11 March &16 April: Centurion Lake (Centurion Gauteng)

13 March & 9 April: Gateway Hotel (Umhlanga)

14 March: Grand West Casino (Goodwood, Cape Town)

15 March & 10 April: Sanlam Head Office (Cape Town)

18 March: NMMU (Port Elizabeth)

19 March: Garden Court Hotel (East London)

11 April: Golden Valley Casino (Worcester)

19 April: Meropa Casino (Polokwane)

22 April: Emnotweni (Nelspruit)

For more info, email: info_seminars@sage.com

Proudly brought to you by Sage Seminars
Powered by Sage Pastel & Sage VIP

By Rob Cooper, Softline VIP payroll and legislative expert

Proposed changes to the Income Tax Act were issued for public comment in July 2012, some of which have a direct impact on employers and computerised payroll systems.

Rob Cooper

Rob Cooper

One change in particular constitutes a major shift in approach from the legislators, but first, a brief overview of the other changes.

Medical Tax Credit Principle to be Extended

From March 2012, we saw the introduction of medical tax credits (tax rebates) for employees under 65 years of age who contribute to a medical scheme.  Changes were also made to the income tax relief granted on assessment to individuals for their out-of-pocket medical expenses subject to certain conditions.

The draft changes now extend the medical tax credit principle for contributions to include those employees who are 65 years of age or older.  The values proposed for their tax credits are the same as those currently used for under 65 year old employees, and are based on the number of dependents.

Then the deduction system of income tax relief for out-of-pocket medical expenses has been replaced by a medical tax credit system, with varying degrees of relief for over and under 65 year old employees, and for those who are disabled or with a disabled spouse or child dependent.

What is of concern is that the tax relief granted for medical contributions and out-of-pocket medical expenses has been whittled away by the changes made last year and the proposed changes in the draft legislation, particular for those taxpayers who earn above the 30% marginal tax rate.

Individuals over the age of 65 and those who are pensioners in particular have been hit hard in recent years by dividend tax changes and interest tax relief amongst other measures.  A further reduction in the assistance from the state for medical contributions and medical expenses is going to hurt these individuals.

The same can be said for families with a disabled person – surely these individuals deserve more support, not less?

Employment-related Insurance Policies

The taxation of employer-owned insurance policies that impact on employees has been the subject of complex changes to the law over the past two tax years.  Just when it seemed that the dust had settled, the draft legislation proposes some more changes that are too complex and too confusing to discuss here.

The words “unintended consequences” again come to mind …

Learnerships

Some fine tuning has been made to the provisions which allow employers a deduction from income of R30 000 at the start and the end of a learnership.  These changes address the delays in registration of the learnership with a SETA which can reduce the value of the incentive, as well as the disallowance of the incentive will be limited to learnerships that the employee failed while working for the current employer.

Accrual of Variable Remuneration

One of the pillars that our tax law stands upon is the concept of ‘accrual’.

Amounts are generally interpreted to have accrued when there is an unconditional entitlement to that amount.  This causes problems for payroll systems that have to withhold employees’ tax on amounts that accrued in one tax year, but were only quantified and processed in the next tax year.  Adjustments to monthly payments to SARS, tax certificates and reconciliations are the inevitable result of adjusting amounts back into a tax year that has already closed.

In one of the most significant changes to employees’ tax requirements in decades, the accrual principle is proposed to be relaxed for variable remuneration items such as commissions, travel payments, overtime and bonuses.

At this early stage, much thought still has to be put into the practical implications of this change, but there is no doubt that it will significantly simply payroll administration over the tax year end for employers and for SARS and is to be welcomed.

Closing thoughts

Lastly, there are some items that have been proposed in the Budget by the Minister of Finance for a number of years and which, while still bubbling away, have not yet made their way into draft legislation.

These include the standardisation of taxation rules for retirement funds, and some changes to the Unemployment Insurance Legislation.

Unfortunately, the political football that the Youth Subsidy has become has been booted into touch, to be replaced by a Job Seeker grant system which has not even been discussed or quantified.

By Rob Cooper, a Payroll Tax Expert at Softline VIP

Rob Cooper

Rob Cooper

Bursaries and scholarships increase value for employers and employees by improving overall skills levels. The South African 2012-2013 Budget made changes to the legislation regarding the taxation of bursaries and scholarships. Bursaries are generally employer deductible and potentially tax free to an employee or their relative.

Bursaries granted by companies can be divided into two groups: Open bursaries are granted to individuals who are not company employees, and closed bursaries are granted to employees or relatives of employees. Open bursaries are not taxable and provide a positive way for companies to make a difference to South Africa’s skills shortage by providing the means for individuals who are not currently employed to gain qualifications and skills.

Closed bursaries, granted to individuals who are employees, or a relative of an employee, can be tax free, partially taxed or fully taxed depending on the bursary amount and the employee’s annual remuneration amount. A closed bursary granted to an employee is exempt from tax if the employee agrees to repay the bursary amount should he/she fail to complete or pass their studies for any reason other than death, illness or injury.

According to the legislation, closed bursaries granted to a relative of an employee are taxable if the employee’s remuneration exceeds R100 000 and if the bursary value exceeds R10 000. To explain:

  • If the employee earns less than R100 000 a year, and the bursary amount is R8 000, then the entire amount is exempt from tax.
  • If the bursary is worth R12 000, then R10 000 of that amount is exempt from taxation while the additional R 2 000 is taxable.
  • If the employee earns more than R100 000 annually, all bursaries or scholarships are taxable.

To calculate the R100 000 limit, the entire income amount must be used and must not be ‘fourth schedule remuneration’.  For example, the income must also include the employee’s full travel allowance.  If remuneration exceeds R100 000 after the bursary is paid, then the untaxed portion of the bursary must be taxed.

From March 2012, the exempt portion of the bursary amount needed to be reported against a new code 3815, and the taxable portion of the bursary as code 3809, which has been re-activated. This enables SARS to see the total value of the bursary on the employee’s tax certificate.

A bona fide bursary may include the costs of tuition fees, registration fees, examination fees, books, equipment required, accommodation, meals or meal vouchers and transport.

The South African legislation regarding the taxation of bursaries and scholarships supports local companies that want to make a positive impact on the South African skills shortage and decrease poverty levels by providing both employees and non-employees with opportunities to study and gain valuable skills. This is an avenue that companies should understand and pursue in order to maximise the impact of their tax deductible contributions.

Rob Cooper, a Payroll tax expert at Softline VIP, part of the Sage Group plc says that 2012 will prove to be the starting year for a number of major new employment legislation initiatives.

Read about all the proposed changes in legislation regarding contributions to medical schemes, the Youth Subsidy project, retirement funds and annuities in the full article on the Softline website

Looking further ahead, SARS is still investigating the possibility of implementing a social security tax. “The legislation surrounding social security tax is however still on the table. In essence, the legislation will combine UIF, the road accident fund, social grants and the compensation fund under a ‘social security’ umbrella that will function as a holistic entity. It will effectively modernise and streamline the process” explains Cooper.

SARS is also looking at amending labour legislation. “There are quite a few aspects surrounding labour legislation that are currently under review,” says Cooper.

• Close down or regulate labour brokers

• Redefine an employer

• Introduce the concept of ‘decent work’ into legislation

• ‘Widen’ the definition of an employee

• Introduce a national ‘job placement’ system

Cooper says the labour legislation should be in draft form by no later than April 2012 and unless there is huge public opposition, could be promulgated into law by December 2012. The Minister of Labour is currently pushing very hard to move even faster than these dates.

“2012 will certainly be an interesting year as far as HR and Payroll administrative changes are concerned. It will therefore be advisable for practitioners in the field to stay abreast of changes in the New Year” concludes Cooper.