“I am the owner of a construction business. In our industry skills development is very important and I invest where possible in training my staff. I understand that if I allow my staff to take up learnerships through my company there are certain tax benefits that I can use to help cover the costs of the learnerships. Is this correct?”
Investing in learnerships, can be a costly exercise even though it is a worthy investment. Fortunately from a BEE and tax perspective, government provides incentives to businesses such as yours to invest in such formal learning programmes.
Any business, when reporting under the Skills Development element of its BEE Scorecard can obtain valuable points for its investment in learnerships for its staff who qualify as black as defined in the B-BBEE Codes, already making this a worthwhile effort to investigate. In addition an employer can also potentially benefit from each employee that is registered for a formal learnership under section 12H of the Income Tax Act 58 of 1962.
In essence, section 12H currently determines that an employer can claim a learnership allowance for every employee it enrols in an accredited learnership. For every learner enrolled, R30,000 can be deducted from the business’ taxable income per year for which the employee is enrolled, and for every disabled learner enrolled, R50,000 can be deducted. A further incentive for employers exist in the form of a completion allowance that the employer can claim for each learner that successfully completes a learnership. The completion allowance is the same as the learnership allowance, and is awarded upon successful completion of the learnership.
The latest proposed Draft Taxation Laws Amendment Bill proposes an amendment to the current section 12H along the following lines:
1. That the conclusion date of leanerships contemplated in terms of the definition of a “registered learnership agreement” be extended to 31 March 2022. Currently, the learnerships had to have been concluded by and between the employee and employer on or before 1 October 2016, but the proposed amendment will extend this opportunity for a considerable few years.
2. To advance technical skills development and improve job creation, registering employees in possession of National Qualification Framework levels 6 and lower for learnerships could afford an employer a R40,000 learnership allowance as opposed to the ordinary R30,000 allowance. Registering employees in possession of National Qualification Framework levels 7 and higher will entitle the employer to a R20,000 learnership allowance.
An Employment Tax Incentive offered in conjunction with government is further aimed at incentivizing employers to employ young, mostly unskilled employees. The benefit herein lies in that young people become more employable whilst the employer benefits from a cost-sharing with government. The Employment Tax Incentive is only available to employers with respect to employees who:
1. Have valid South African ID’s;
2. Are between the ages of 18 to 29 years;
3. Are not domestic workers;
4. Are not related or “connected” to the employer;
5. Earn at least a minimum wage in terms of wage regulating measures (If none exist then the employee must earn R2000 per month in wages);
6. Earn less than R6 000 per month in total remuneration (basic salary plus all other benefits); and
7. Were newly employed on or after 1 October 2013.
Before the aforementioned Draft Taxation Laws Amendment Bill was published for comment, employers were only able to claim employment tax incentives in terms of the Employment Tax Incentive Act of 2013 until 1 January 2017. The Draft Taxation Laws Amendment Bill aims to extend this date until 28 February 2019.
By way of the above incentives, you will be able to invest in your employees, whilst simultaneously ensuring that a BEE and financial incentive is also received by your business for doing so. It is however important that you seek the advice of a knowledgable professional to ensure that your BEE planning is correctly conducted and an accredited skills academy is recommended which offers accredited learnership programmes to ensure that you are able to benefit from the offered incentives.