How Learnership Allowances can Reduce your Tax Bill
by Tarryn Mason

Did you know that investing in Skills Development under a formal learnership provides you with the opportunity to claim a tax deduction according to Section 12H of the Income Tax Act?

Section 12H of the Income Tax Act states that employers are eligible for an allowance in respect of qualifying ‘registered learnership agreements’ entered into between the employer and employee.  

This learnership allowance tax deduction was due to come to an end in October 2016. However, after National Treasury conducted research into the effectiveness of the allowance as a way of successfully creating employment opportunities and growing the economy, a decision was taken to extend the learnership allowance. 

 The allowance serves as an incentive for employees to train and upskill employees and non-employees, especially people with disabilities, thereby encouraging skills development and job creation in the process. 

To take advantage of this incentive, you must register the learnership agreement with your SETA (Sector Education and Training Authorities) and complete an IT180 declaration form which should be submitted to SARS. 

Available Learnership Allowance 

The allowance is made up of two parts, namely: 

1. An Annual Allowance 

An annual allowance is claimed for each year of assessment in which the employee is party to a learnership agreement. For instance, if the learnership agreement is for three years, you will be able to claim the allowance for three years in a row.

If the learnership did not run for a full 12 months in the year of assessment, the allowance should be apportioned.

2. A Completion Allowance 

The completion allowance is claimed in addition to the annual allowance. This is a once-off claim in the year of assessment in which the learnership is successfully completed. Should the learnership not be completed for any reason, this allowance cannot be claimed by the employer.

This allowance can be claimed in full regardless of which month it was completed in – it should not be apportioned.

If the learnership agreement exceeded 24 months, the completion allowance is multiplied by the number of completed 12-month periods.

Looking at the Figures

 Both the annual and completion allowance vary according to the NQF level of the learnership as well as whether the learner has a disability or not.

For Learners Without Disabilities:

Annual allowance:
o NQF level 1 - 6 – R40 000 

o NQF level 7 - 10 – R20 000 

Completion allowance:
o NQF level 1 - 6 – R40 000 

o NQF level 7 - 10 – R20 000 

For Learners With Disabilities:

Annual allowance:
o NQF level 1 - 6 – R60 000 

o NQF level 7 - 10 – R50 000 

Completion allowance:
o NQF level 1 - 6 – R60 000 

o NQF level 7 - 10 – R50 000 

Example

Thabo is a learner with a disability being placed on a Business Administration Learnership NQF 2. The cost of the training is R 62 000. Thabo’s stipend whilst on the learnership is R 5000 per month, equating to R 60 000,00 per annum.  Thus, the total cost of the learnership is R 62 000 + R 60 000 = R 122 000. 

The annual allowance that can be claimed for Thabo’s learnership is R 60 000. Once Thabo has completed his learnership, the completion allowance of R 60 000 may be claimed. Thus, a total of R 120 000 may be claimed resulting in the actual cost of the learnership amounting to R 2000 ( R 122 000 – R 120 000 = R 2000).

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