Learnership Tax Incentives

By Skills Junction | August 6, 2022

Skills Development Levy

All businesses with a payroll of more than R500 000 per year are required to pay SARS 1% of their annual salaries to the Skills Development Levy (SDL). SARS will automatically assign your company’s SDL to the SETA they believe you should be registered with. The funds are to be used to develop and improve skills of employees.

Section 12H Learnership Allowance

The Learnership Tax Incentive allows employers to claim a section 12H allowance in respect of all qualifying learnership agreements. To claim the learnership tax incentives allowance – the employer, learner, and accredited training provider must enter into a SETA learnership agreement.

The Allowance is made up of two parts:

1. An Annual Allowance – This is available for each assessment year that the learner participates in a SETA registered learnership, for Learnerships that started after October 1, 2016, but before April 1, 2022, the allowance is as follows:

  • NQF level 1-6, the employer can claim a tax allowance of R40,000 (for abled learners) and R60,000 (for learners with disabilities)
  • NQF level 7-10, the employer can claim a tax allowance of R20,000 (for abled learners) and R50,000 (for learners with disabilities)

2. A Completion Allowance – A once off payment in the year of assessment in which the learner successfully completes a SETA registered learnership. This is claimed in addition to the annual allowance, which means that in the year of completion, the employer can claim both the annual allowance and the completion allowance as follows:

  • NQF level 1-6 R20,000 (for abled learners) and R 60,000 (for learners with disabilities)
  • NQF level 7-10 R20,000 (for abled learners) and R50,000 (for learners with disabilities)

Qualifying Criteria

Employers will qualify for the annual allowance only if:

  • During any year of assessment, the learner is part of a SETA registered learnership agreement
  • The learner holds an NQF-level qualification
  • The agreement is entered into pursuant to a trade carried on by that employer
  • The employer derives ‘income’ as defined in section (1) of the Income Tax Act from that trade
  • SARS requires proof of successful completion of the relevant learnership agreement for employers to claim the section 12H completion allowance. SARS normally accepts confirmation from the relevant SETA in the form of certificate of competence as sufficient proof of completion.

A SETA registered learnership agreement means a learnership agreement that is registered in accordance with the Skills Development Act i.e. registered with a SETA and entered into between a learner, employer and training provider.

Exclusions and Limitations for claiming the section 12H tax allowance

  • The annual allowance is available during the time that a learner is a party to a SETA registered learnership agreement.
  • The learner fails to complete a SETA registered learnership to which the employer or a related institution was a party.
  • The SETA learnership agreement includes the same education and training component as a previous SETA registered learnership.
  • If the SETA learnership agreement is terminated (either by the employee resigning or by the employer terminating the learner’s employment), the employer may deduct a pro-rata portion of the annual allowance for that year.
  • If a SETA learnership agreement is terminated and the learnership is not completed, the employer is not entitled to deduct any further annual allowances or the completion allowance in relation to that learnership agreement.

There is more…

Employment Tax Incentive – ETI

ETI is a tax concession made to encourage employers to hire young people with no work experience, ETI is available to employers who are registered for PAYE and have their tax affairs in order. This incentive will supplement existing government programmes with similar objectives, such as learnership agreements. The ETI was implemented with effect from 1 January 2014 and will end on 28 February 2029.

The ETI calculations are as follows:

  • ETI per month during the first 12 months of employment of the qualifying employee is R 1 000
  • ETI per month during the second 12 months of employment of the qualifying employee is R 500

Official Sources: Learnership Tax Incentives ; Employment Tax Incentive (ETI)

Quick Fact! “Your Development is our Driving Force”

Skills Junction is a SETA accredited training provider and a Level 1 EME with 100% B-BBEE compliance and 135% procurement recognition.

“Your Development is our Driving Force”

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