How Learnership Tax Incentives Can Benefit Your Business

In today’s business world, skills development is more important than ever. South African businesses have a unique opportunity to reduce costs and upskill employees through the learnership tax incentive, particularly under Section 12H of the Income Tax Act.

By entering into registered learnerships, businesses can claim tax deductions that not only benefit the bottom line but also help create a more skilled, inclusive workforce.

What is a Learnership?

A learnership is a work-based learning programme that combines theoretical learning with practical work experience. These programmes are designed to help learners (whether employees or unemployed individuals) gain the skills and qualifications needed for success in the workplace. Learnerships must be registered with a Sector Education and Training Authority (SETA) relevant to the industry in which the business operates, ensuring that the training aligns with industry standards.

How Learnership Tax Incentives Work

The learnership tax incentive applies to businesses that enter into registered learnership agreements with their learners. This incentive allows companies to claim tax deductions, which can lead to significant savings.

• Annual Allowance: Employers can claim a tax deduction for each year the learner is registered in the learnership.
• Completion Allowance: A second tax deduction can be claimed once the learner successfully completes the programme.

The good news? These deductions make learnerships more affordable, so businesses upskill employees without adding significant financial strain. When submitting your annual tax return, you can claim these incentives, provided all the necessary documentation is in order.

Benefits for Businesses

Learnerships offer a wide range of benefits for businesses:

• Lower Tax Bills: The Section 12H tax incentive can lower your company’s tax liability, freeing up funds that can be reinvested into other areas of the business.
• Building a Skilled Workforce: Learnerships are a great way to build a team with the skills your business needs, ensuring that you have qualified staff ready to meet industry demands.
• Promoting Inclusive Employment: For businesses that support learners with disabilities, there are enhanced tax deductions available. This incentive encourages businesses to create more inclusive workplaces by offering learners the support and accommodations they need to succeed.

Supporting Learners with Disabilities

South Africa’s learnership tax incentive includes special provisions for businesses that support learners with disabilities. These learners often face extra challenges, so the government offers higher tax deductions to businesses that help accommodate and support them.

To qualify for these enhanced deductions:

• The learner must be registered as a person with a disability.
• The learnership must meet all SETA requirements.
• Businesses must ensure that accessibility and reasonable accommodation are provided in the training and working environment.

Offering this support not only helps learners with disabilities but also strengthens your company’s commitment to diversity and inclusion.

What Happens if a Learner Drops Out?

It’s possible that a learner may leave the programme before finishing it. This can happen for various reasons, but the good news is that the learnership tax incentive is still available for the time the learner was registered.

If a learner drops out before completion, businesses can claim a pro-rata deduction based on the time the learner participated in the learnership. However, completion allowances won’t be available if the learner doesn’t finish the programme. While this may feel like a loss, businesses can still benefit from the tax savings for the period the learner was enrolled, which softens the impact.

The Process for Registering Learners

To claim the learnership tax incentive, businesses need to follow a few key steps:

• Register with the Relevant SETA: The learner must be registered with the employer’s SETA, according to the industry within which the business operates. It’s essential that the learner is registered with the SETA that oversees the relevant sector.
• Sign the Workplace-Based Learning Agreement: You’ll need to enter into a workplace-based learning agreement with the learner, outlining the terms and conditions of the training programme, including the duration. This agreement must comply with the regulations set out by the Department of Higher Education and Training (DHET).
• Submit the Necessary Documentation: Ensure that all the required documents, including the registration with the SETA, are submitted correctly. This ensures compliance with DHET and other relevant authorities.
• Claim the Tax Incentive: After the learner completes the programme (or once the annual tax period ends), businesses can submit a claim for the tax deduction when filing their annual tax return.

Compliance with Regulations

To qualify for the learnership tax incentive, businesses must comply with all relevant DHE, SETA regulations, as well as the SARS interpretations notes and ?Section 12H of the Income Tax Act. These include requirements for workplace-based learning agreements, provisions for learners with disabilities, and other compliance matters that must be followed throughout the learnership.

It’s essential to stay updated with the regulations set out by SETAs and DHET, so your business remains compliant and eligible for the tax benefits.

The learnership tax incentive is an incredible opportunity for businesses to reduce tax costs while simultaneously investing in the skills of their workforce. It’s a win-win: businesses develop the talent they need, while learners gain practical skills that make them more competitive in the job market.

To make the most of this incentive, ensure that all the correct steps are followed, including proper registration, compliance with regulations, and understanding the financial implications of learner drop-outs.