There are many advantages to upskilling your workforce. By investing in training, employers can bridge critical skills gaps while retaining employees, and enhance access to further education for promising yet financially constrained students. In an effort to support skills development and job creation, SARS also offers ‘study’ incentives or tax breaks to businesses wanting to upskill their employees.
South African taxation laws requires all businesses who are registered with SARS for employees’ tax purposes to also be registered with SARS for skills development, irrespective of whether they are excluded from paying the levy. (Source)
In this article, we’ll explain the various tax incentives available to employers and what they mean for employees.
General deduction on employees’ educational costs
Employers generally qualify to deduct bursaries provided to employees and other training costs in terms of the general tax deduction formula. This applies in the year of assessment in which the employer actually incurs the costs.
For learnership agreements and apprenticeships registered with Sector Education and Training Authority (‘registered learnership agreements’), there are two types of deductions allowable.
Annual Allowance: The employer is entitled to R30,000 for every full 12 months of assessment in which a learner is party to a registered learnership agreement.
Completion Allowance: On successful completion of the registered learnership agreement, the employer receives a completion allowance, which is in addition to the annual allowance and any other deductions.
The completion allowance amount depends on the period of the registered learnership agreement. If less than 24 months, the completion allowance amounts to R30 000. If the period exceeds 24 months, the completion allowance amounts to R30 000 for every consecutive 12 month-period falling within the learnership agreement. The R30 000 used in both cases increases by R20 000 if the learner has a “disability”.
Scholarships and bursaries, and loan funding
Another way of providing study assistance to employees is by reimbursing an employee’s study debts after successful completion, or by granting no-interest or low-interest loans to employees.
A reward or reimbursement to an employee after successful completion of a course or qualification should be included in the employee’s gross income and does not qualify for the bursary exemption. This also applies to loans waived on successful completion of an employee’s studies.
The important thing to remember is that your staff members are your biggest asset. And the best way to ensure a highly productive, highly motivated workforce is firstly, by hiring the right people, and secondly, by upskilling those people. Even more importantly, upskilling contributes to the greater need for education and skills development opportunities in our country.
For this reason, companies are encouraged to invest in their employees by providing and supporting training interventions, and are incentivised for doing so.
For more advice on this and other tax regulations, and how they can be implemented within your HR function, get in touch with one of our highly trained consultants.