The Learnership Tax Incentive, which was introduced in the Income Tax Act on 1 October 2001, is a programme that supports skills intensity through the tax system. To encourage skills development and job creation, the Learnership Tax Incentive provides employers with an additional tax deduction over and above the normal deduction on remuneration. The additional deduction is intended to encourage vocational training through formal learnership contracts and provide accredited workplace training through the employer. To claim the allowance, the employer, learner, and an accredited training provider must enter into a formal learnership contract. Similar to all other tax incentives, when the learnership tax incentive was introduced, it had a sunset date of 1 October 2011. In 2011, a review was conducted to assess the effectiveness of the Learnership Tax Incentive in achieving its objectives before the sunset date. After the review, the Learnership Tax Incentive was extended by another five years to 1 October 2016.
In 2016, a further comprehensive review was conducted to reassess the effectiveness of the Learnership Tax Incentive in achieving its objectives. The outcome of the review indicated sufficient evidence to support the continuation of the Learnership Tax Incentive beyond its previous sunset date of 1 October 2016. However, the review also revealed that claims were not evenly spread across sectors. Sectors with high uptake were those where SETAs were perceived to administer training programmes more effectively. The 2016 review recommended: (i) the extension of the incentive sunset date to 1 April 2022, (ii) improving the targeting of the incentive by encouraging employers to train learners in those skill categories where demand is highest, and (iii) to improve future incentive policy analysis, completion of the SARS IT180 form was made compulsory for taxpayers to claim the Learnership Tax Incentive.
The Learnership Tax Incentive has a current sunset date of 1 April 2022. The effectiveness of the incentive in achieving its objectives will need to be assessed before this date to determine whether it continues. In the 2021 Budget Review, the Minister of Finance announced that the incentive would be extended by a further two years beyond its current sunset date, pending review.
In line with the Minister’s 2021 Budget announcement, it is proposed that changes be made in section 12H of the Act to extend the Learnership Tax Incentive by another two years, to 1 April 2024. The proposed amendment will come into effect on 1 April 2022 and applies in respect of learnership agreements entered into after that date.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).