Tax and Community Benefits of Offering Training
What Are The Tax Benefits Of Offering Employees The Chance To Enter Into Learnership Agreements?
The short answer to this question is that the benefits are substantial and the process not that tricky.
History Of The Skills Development Tax Break:
According to the SARS Guide on Incentives for Learnership Agreements (first issued in October of 2009, but still enforced today):
Full document available here.
“Skills development is an integral part of the country’s overall objectives to reduce poverty and the decline in employment, increase job skills and improve the economic growth of the country. To give effect to the National Skills Development Strategy, the Skills Development Act, No. 97 of 1998 was introduced in 1998 to establish an institutional and financial framework for training and development of skills in the workplace.
This Act provides, amongst other things, for the registration of learnerships by the various SETAs.(Sector Education Training Authorities.)
A tax incentive for registered learnership agreements was introduced by the Minister in his 2002 Budget Speech.”
The Purpose Of This Tax Incentive Is To:
- Encourage job creation by reducing the cost of hiring and training employees through learnerships;
- Promote skills development;
- Encourage human capacity development
What Do These Deductions Look Like?
The tax incentives, in the form of allowable tax deductions are, as mentioned before, substantial, and straight froward.
The deductions amount to certain percentages of “learnership allowances” which means the amount of remuneration paid to the employee who has entered into a “valid learnership agreement” during the period of the agreement.
This Can Mean:
- 70% of the “allowance” for an existing employee;
- 100% of the “allowance” for a new employee;
- 150% of the “allowance” for an existing employee who is also a “disabled person”;
- And 175% of the “allowance” for a new employee who is a “disabled person”.
Why Does This Matter?
As you can see, the tax incentives are worth it, but the true value of this program lies with the lives it can change. South Africa struggles with a crippling unemployment rate of nearly 35% and a staggering youth unemployment rate of more than 60%. Without concerted efforts by all South Africans this dire situation will not improve, and our country will never be able to reach its full potential.
