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Learnership agreements and tax allowances

To encourage skills development and job creation SARS grants a learnership allowance to employers who has registered training contracts with employees.

What are the tax advantages of learnerships:

SARS grants the learnership allowance in of two parts, there is an annual allowance and a completion allowance. The annual allowance is also apportioned if the allowance was for only part of the year.

 

From 1 October 2016 the allowance will depend on the National Qualification Framework (NQF) level of the learnership.

 

For NQF levels 1 – 6 an allowance of R40 000 is granted and for NQF level 7 – 10 an allowance of R20 000 is granted. The allowance for persons with a disability is R60 000 and R50 000 respectively. The completion allowance is also the same amount in the year the learner successfully completes the training contract.

If the learnership agreement is terminated the employer can only claim for that portion in which the agreement was in effect and cannot claim the completion allowance.

 

If the learner moves from NQF level 6 to level 7 the allowance is also apportioned between the different level of the allowances over which periods the different level of qualification was held.

What are the requirements to qualify for the allowance:

  • There needs to be a registered learnership agreement between the employer and employee with the relevant SETA. The agreement needs to be registered within 12 months after the last day of the employer’s year-end. The agreement between the learner and the employer also needs to be entered into before 1 April 2022.

  • An NQF-level of between 1 -10 is held by the learner

  • The employer carries on a trade and derived income from that trade where the learner is employed in but don’t need to make a profit however.

What is the requirements for the completion allowance:

  • The same requirements as above is needed and the learner also needs to have completed the learnership during the year of assessment.

When can the allowance not be claimed:

If the learner did not complete a previously registered agreement with the same employer and the new agreement has the same education and training component as the one that was not completed.

 

Although there is list of requirements to adhere to and some administration involved the allowance is a great incentive for companies to assist them with skills development and will also help with their BEE scorecard.