S12H Learnership Allowance

Skills development is a fundamental aspect of your B-BBEE scorecard and learnership programmes are what drives the country’s effort to increase skills within the workforce, subsequently reducing poverty and improving economic growth.

In an effort to encourage companies to offer Registered Learnership Agreements to individuals who qualify, the South African government has implemented a tax incentive for employers who engage in skills development activities.

This incentive is known as the S12H Learnership Allowance.

The S12H Learnership Allowance Explained

The Learnership Allowance serves as a tax incentive for employers who can claim it as an additional tax deduction from their trade income. The incentive became available to registered learnership agreements that were entered into as of the 1^st of October 2001. Learnership agreements that were initiated between the 1^st of October 2001 and the 1^st of October 2016 fell under the previous S12H.

All learnership agreements entered into between the 1^st of October 2016 and the 1^st of April 2024 will fall under the new S12H which also has a sunset clause taking effect on the 1^st of April 2024.

What are the Benefits?

The main purpose of this tax incentive is to encourage companies to create new opportunities by upskilling employees. As a result, human capacity within the workforce is improved and newly learned skills and gained knowledge can be passed on to future generations. Ultimately, it aims to improve the economic status of the country.

Additionally, companies can benefit from the Learnership Allowance as it reduces their overall tax liability as well as improving their B-BBEE compliance.

The tax incentive includes both completion and annual allowances which are explained below.

Qualifying for the Completion Learnership Allowance

Employers are entitled to a once-off completion allowance during any year of assessment where the learner completes the learnership successfully. The completion allowance is a once-off allowance which can be claimed in addition to the annual allowance.

Employers will qualify for completion allowance only if they meet the following requirements:

• The learner holds an NQF-level qualification from 1-10
• During any year of assessment, the learner is an official party to a registered learnership agreement with the employer
• The agreement was entered into pursuant to a trade taken on by the employer
• The employer derived income from the trade (as per section 1(1))
• The learner completed the learnership successfully during the year of assessment

In order to successfully claim the completion allowance, the employer must provide SARS with sufficient proof that the learner has successfully completed the learnership agreement. Additionally, SARS also requires confirmation from the relevant Sector Education and Training Authority (SETA).

The completion learnership allowance is calculated as follows:

Qualifying for the Annual Learnership Allowance

The annual allowance is deductible in every year of assessment where the learnership agreement is still active and in place. However, it’s important to note that the allowance will be apportioned should the learnership agreement commence or end partway through the year of assessment. In such cases, a pro rata portion will be calculated.

Employers will only qualify for the annual allowance if they meet the following requirements:

• During any year of assessment, the learner is an official party to a registered learnership agreement entered into with the employer
• Apprenticeships and learnership agreements are registered in accordance with the Skills Development Act
• Apprenticeships and learnership agreements are entered into before the 1^st of April 2014
• The learner holds a valid NQF-level qualification between 1-10
• The learnership agreement was entered into according to a trade taken on by the employer
• The type of trade is any lawful trade in accordance with section 1(1)
• The employer has derived income from the trade (as defined in section 1(1))

The annual learnership allowance is calculated as follows:

Under What Circumstances does the S12H not Apply?

According to the Income Tax Act, employers do not qualify to claim for the learnership allowance if:

• A learnership agreement is not registered or the learner is not employed
• The learner has not successfully completed the learnership agreement while under employment with the same organization
• The learnership agreement contains the same training component as a previous registered learnership agreement

What Happens if a Learnership Agreement is Terminated?

Should a learnership agreement be terminated by either party, the employer will qualify to deduct an amount which equals the pro rata portion of the annual allowance in that specific year.