Extention of learnership allowances and employment tax incentive

With the focus on skills development and job creation, the existing allowance for learnership agreements has been extended to all agreements entered into before 1 April 2022. Similarly the Employment Tax Incentive (ETI) has been extended to 28 February 2019.

Section 12H of the Income Tax Act[1] allows an employer to claim a “learnership allowance” in respect of registered learnership agreements entered into or completed during a year of assessment. For purposes of section 12H the learnership agreement must be registered in accordance with the Skills Development Act.[2] A qualifying employer is entitled to two types of allowances, namely an annual allowance (deductible in any year of assessment during which a learner is a party to a registered learnership agreement) and a completion allowance (deductible in the year in which the learner successfully completes the learnership).

In order to qualify for the section 12H allowance the learnership agreement must furthermore have been entered into before a certain date. This period has been extended from 1 October 2016 previously to 1 April 2022.

Also, with effect from 1 October 2015, the amount of the allowance depends on the level of qualification held by the learner. In this regard, employers qualify for both the annual as well as the completion allowance of R40,000 in respect of learners who hold a qualification equal to the National Qualifications Framework (NQF) level 1 to 6. In respect of learners who hold a qualification equal to NQF level 7 to 10, the employer qualifies for an annual and completion allowance of R20,000 each.

In respect of a person with a disability, the employer qualifies for an additional allowance of R20,000 where the learner has a qualification equal to NQF level 1 to 6, and an additional R30,000 where the learner has a qualification equal to NQF level 7 – 10, i.e. a total allowance of R60,000 and R50,000 respectively.

The ETI[3] was introduced by Government on 1 January 2014 to address the socio and economic problem of youth development. Eligible employers may reduce the monthly employees’ tax withheld and payable to SARS in terms of the Fourth Schedule to the Income Tax Act with the amount of the ETI. It was initially indicated that this allowance will cease on 1 January 2017. However, the incentive has now been extended to 28 February 2019.

In addition to the ETI, an employer may also be eligible for a deduction of a learnership allowance during a year of assessment if the requirements of section 12H of the Income Tax Act are met as set out above.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or ommissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

References:

[1] 58 of 1962

[2] 97 of 1998

[3] Employment Tax Incentive Act No. 26 of 2013

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