Learnership Tax Benefits
Why have a Learnership Incentive?
The Learnership Tax incentive provides an additional tax deduction for registered learnerships. The objectives of this tax incentive are to encourage the creation of jobs by reducing the cost of hiring new employees, offering learnerships and to encourage skills development in the workplace.
How does the additional tax deduction work?
The incentive is regulated by section 12H of the Income Tax Act No. 58 of 1962 (the “Act”), and is available to employers who have entered into registered learnership agreements on or after 1 October 2016 but before 1 April 2022.
The additional tax deduction comprises of both an annual allowance and a completion allowance. There are certain requirements that an employer will have to meet in order to qualify for the annual allowance and they are as follows:
- During any year of assessment the learner must have been a party to a registered learnership agreement with the employer
- The agreement must have been entered into pursuant to a trade carried on by that employer
- The employer must have derived “income” as defined in section 1 of the Act from that trade.
For the completion allowance, an additional requirement is that the learner must have successfully completed the learnership during the year of assessment.
What is important to keep in mind is that the learnership agreement that is entered into must meet the definition of “registered learnership agreement”, as defined. An increased tax deduction is also afforded to learners who have a disability (as defined).
What amount can you claim?
The value of the additional deduction you can claim depends on whether the learnership agreement(s) were entered into before or after 1 October 2016, and the NQF level applicable post 1 October 2016. The tables below set out the amount of additional deductions available, per learner:
| Learnerships entered into on or after 1 October 2016 | ||||
| Annual Allowance (R)* | Completion Allowance (R)** | |||
| NQF level | Learner with no disability | Learner with a disability | Learner with no disability | Learner with a disability |
| 1 – 6 | R40 000 | R60 000 | R40 000 | R60 000 |
The annual allowance must be apportioned according to the period that the learner is a party to the agreement, taking into account the year of assessment of the employer, as well as the NQF level of the learnership (for registered learnership agreements entered into on or after 1 October 2016).
The completion allowance works as follows:
- If the learnership period is less than 24 full months, the completion allowance is awarded as a once off amount upon completion of the learnership, taking into account the NQF level of the learnership
- If the learnership period is equal to or more than 24 full months, a completion allowance is awarded upon completion of the learnership for each consecutive full 12 month period, that the learner is a party to the learnership, taking into account the NQF level of the learnership. This is a cumulative allowance and therefore upon completion of the learnership, you will receive a sum of all the completion allowances that you are entitled to in respect of that learnership.
When can you not claim the allowance? Unfortunately you cannot claim the additional Section 12H deduction if: The learner has previously failed to complete any other registered learnership agreement to which the employer or an associated institution was a party to; and The registered learnership agreement contains the same education and training component as the other failed registered learnership agreement.
Why use Alabaster Training Centre? The learnership incentive is an important development tool for encouraging greater employment and up skilling of the South African workforce. Not only are you empowering the human capital of South Africa, you will also be lowering your effective tax rate. Alabaster TC is a web-based solution that empowers you to take control of all the necessary pieces of data required for the additional tax deduction, and provides an automated and efficient processing facility to generate the IT180 tax return data required for tax return purposes.
Functionality provided by Alabaster Training Centre Leadership Tool: – Uploads necessary learnership data; and – Accurately calculates annual allowance and completion allowance for the relevant year of assessment, taking into account legislative changes; and – Runs an exception report which identifies where data may be missing; and – Provides generation of inter-divisional reports; and – Populates and electronically completes the compliance for the learnership allowance (the IT 180’s) thereby significantly minimizing management time; and – Allows you to upload and store learnership contracts.
Alabaster Training Centre will maximize your additional learnership tax deductions, with minimum costs of compliance and providing you with the comfort of knowing that all required documentation to substantiate the tax deduction is easy to accessed.
Allowance to Employers
Section 12H of the Income Tax Act (the Act) provides for an allowance to employers in respect of qualifying ‘registered learnership agreement’(s) entered into between the employer and employee. The allowance is intended as an incentive for employers to train employees in a regulated environment in order to encourage skills development and job creation. A ‘registered learnership agreement’ is defined as one which is:
- Registered in accordance with the Skills Development Act, 1998
- Entered into between a learner and an employer before a date specified in the Income Tax Act.
Are there any tax allowance to a learnership?
Yes. Section 12H of the Income Tax Act No. 58 of 1962 grants an additional tax allowance of up to R120 000 in respect of recognized learnership agreements entered into by employers.
Who is eligible for the learnership tax allowance?
All businesses that enter into a recognized learnership agreement are eligible for the Learnership Tax Allowance, provided that their tax is up-to-date with SARS.
When can you claim the learnership tax allowance?
By way of example the tax allowance consists of:
- R40 000 entry allowance earned pro rata over the tenure of the learnership agreement.
- R40 000 completion allowance earned once the learner successfully passes the learnership agreement.