How businesses can benefit from Learnerships and Tax Rebates

Skills Development is a key element of B-BBEE compliance, making it imperative for businesses to focus on this element of their operations. With the revised BEE Scorecard in effect, companies must spend 3% (QSE Scorecard) or 6% (Generic Scorecard) of their annual payroll on training initiatives to potentially gain maximum Skills Development points for their BEE rating.

These targets may seem challenging and even intimidating for businesses, as it amounts to huge expenditure. Most likely, business owners and management struggle to justify that cost. By utilizing SETA Discretionary Grants and Learnership Tax Rebates, businesses can implement the required training in a more cost-effective manner. Read more: Discretionary Grants – what are they, and how do I apply?

TAX REBATES EXIST TO HELP COMPANIES IN FUNDING THE IMPLEMENTATION OF LEARNERSHIPS. IN ESSENCE, BUSINESSES THAT IMPLEMENT LEARNERSHIPS CAN CLAIM A TAX REBATES PER LEARNERSHIP. THIS ALSO MEANS THAT YOUR BUSINESS CAN CAPITALIZE ON THE INVESTMENT OF IMPLEMENTING LEARNERSHIPS: YOU CAN GROW YOUR BUSINESS WITH A STRONGER WORKFORCE AND CONTRIBUTE TO THE GROWTH OF THE COUNTRY’S ECONOMY BY TRAINING LEARNERS AND GIVING THEM THE OPPORTUNITY TO THEN ADD THEIR SKILLS INTO THE INDUSTRY AND YOUR OPERATIONS.

A Learnership should be seen as a positive program, one that enhances your workforce through proper education, and leads to better productivity as well as addressing the current lack of education and training we are facing in South Africa. In March 2020 it was reported that the 3 most difficult positions to fill in South Africa are Skilled Trades, Technicians, and Sales/Marketing Positions. Learnership opportunities could be especially effective to hone these skills and introduce new competent workers into the labour force.

IT IS CLEAR THAT TAX REBATES, UTILIZED WITH LEARNERSHIPS, CAN BE A GAME-CHANGER FOR YOUR BUSINESS.

Understanding exactly how Tax Rebates are structured and how you can benefit from them is an important step toward implementation. This article explores and provides a detailed breakdown of these elements for business owners to make informed decisions that can produce tangible benefits.

Tax Rebates for Learnerships: How it works

If a business registers a Learnership and takes on employees or workers on a Learnership, they are eligible for Tax Rebates. The Tax Rebate is made up of two parts:

An Annual Allowance:

• This allowance is available for each year of assessment that the employee takes part in the Learnership. It is apportioned if the agreement was not in effect for the full year.
• You may claim your Annual Tax Rebate when:
  1. The employee on the Learnership has completed an NQF level.
  2. During the year of assessment, an employee has registered a Learnership agreement with you, the employer.
  3. The Learnership agreement was entered into, pursuant to a trade carried by the employer.
  4. The employer derived income from that trade.
  5. The Learnership Programme is registered with the relevant SETA.

A Completion Allowance:

• This is a once-off allowance, available in the year of assessment in which the employee successfully completes the registered Learnership agreement. It’s claimed in full, regardless of which month the Learnership was completed. It is claimed in addition to the Annual Allowance, meaning that in the year of completion, the employer can claim both the Annual Allowance discussed above and the Completion Allowance.
• You may claim your Completion Tax Rebate when:
  1. The employee on the Learnership has completed an NQF level.
  2. During the year of assessment, an employee has registered a Learnership agreement with you, the employer.
  3. The Learnership agreement was entered into, pursuant to a trade carried by the employer.
  4. The employer derived income from that trade.
  5. The employee successfully completed the Learnership during the year of assessment.
  6. At the time of registration, the employer who registered for the Learnership agreement must be the same employer upon completion of the agreement.
  7. A Learnership agreement cannot be altered and must be the same agreement from registration until completion of the programme. This is to say, employees who have registered multiple agreements must keep to the same respective agreements and cannot replace one with another.
  8. The Completion Allowance is granted once-off, in addition to the annual allowance, and is deductible in the year of assessment in which the employee successfully completes the Learnership, provided that sufficient proof of completion is supplied to SARS.

Table: Annual Tax Rebates for Learnerships and Respective Qualifications

	Qualification	Tax Rebate
Learnership for Able-bodied person	NQF 1-6	R40 000
NQF 7-10	R20 000
Learnership for Disabled Person	NQF 1-6	R60 000
NQF 7-10	R60 000

The SARS ITR-DD form for ‘Confirmation of Diagnosis of Disability’ for Disabled Learnerships is available here (March 2020)

When will Tax Rebates not be allowed?

It is of crucial importance for employers considering or implementing Learnerships to know, upfront, that the Tax Rebates can NOT be claimed if:

1. The employer is changed during the course of the program. None of the companies may then claim the Tax Rebate on completion of the program.
2. A Learnership is substituted with another Learnership for the same employee.
3. The same Learnership program is registered with the same employee more than once.
4. The employee was unable to complete any other Learnership the employer has entered into with the employee.
5. Another Learnership contains the same training component as a newly registered Learnership.

These measures are mostly put in place to prevent businesses from exploiting the Tax Rebate incentive with the deceitful implementation of multiple Learnerships.

Calculating your Tax Rebate

When the Learnership lasts 12 months, you may claim the full Tax Rebate allowance. Anything less than 12 months will be apportioned by the relevant period, as illustrated in this example:

An able-bodied learner, on an NQF 2 Learnership, is part of a Learnership programme for a 3-month period of the year.

The 3-months’ duration of the Learnership is then divided by 12 months, and multiplied by the amount of the Tax Rebate that applies as follows:

3/12 (months) x R40 000 (full amount of possible Tax Rebate) = R10 000 actual Tax Rebate

Note: 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).

To Summarize:

The purpose of this incentive as Tax Rebates is to encourage companies to upskill employees, create new opportunities and effectively also job creation. This is done by reducing the cost of hiring and training employees through Skills Development, Learnerships and encouraging human capacity development ensuring that we pass on the knowledge to the next generation.

Learnerships are an integral part of the country’s overall objectives to reduce poverty, increase skills within the workforce and improve the economic growth of South Africa. Not only are businesses empowering the human capital of South Africa, but the organisation and private sector will also benefit by lowering their effective tax rate.

Are you ready to implement Learnerships? SDF Corp can help you

SDF Corp has over 20 years’ experience in providing our clients with the best strategic business solutions to help them navigate complicated and often cumbersome legislation in order to get the most out of Skills Development. Contact us for expert assistance and advice.