Section 12H Learnership Allowance
Also known as: Learnership Allowance, Section 12H Deduction.
What is Section 12H Learnership Allowance?
Section 12H of the Income Tax Act 58 of 1962 grants employers a tax allowance for registered learnerships. The allowance is an annual deduction of R40 000 per learner (R60 000 if the learner has a disability) during the learnership, plus a completion allowance of the same amount when the learnership ends.
Drafted and reviewed by
Attorney & Founder, My-Contracts.co.za · Legal Practice Council of South Africa (LPC F17333)
Definition and context
Section 12H is a targeted tax incentive that encourages employers to participate in SETA-registered learnerships. The allowance has two components: an annual allowance claimable each year while the learnership is in progress, and a completion allowance claimable in the year the learner completes the programme. Under current rates, the annual and completion allowances are each R40 000 per learner at NQF levels 1 to 6, rising to R60 000 per learner at NQF levels 1 to 6 where the learner has a disability as defined in the Promotion of Equality and Prevention of Unfair Discrimination Act. For NQF levels 7 to 10, the allowance is R20 000 annually and on completion.
To qualify, the learnership must be registered with a Sector Education and Training Authority (SETA) under the Skills Development Act 97 of 1998, and the learnership agreement must be in writing and contain the prescribed particulars. The employer must be the registered party to the learnership agreement and must claim the allowance in the income tax return for the year of assessment. Section 12H(5) disallows the allowance where the learner was already employed by the same employer immediately before entering the learnership, except in prescribed circumstances — a commonly-missed disqualifier.
The incentive pairs naturally with the Skills Development Levy payable under the Skills Development Levies Act 9 of 1999 at 1% of payroll. Employers who structure an active learnership programme reclaim a substantial portion of their SDL through SETA mandatory and discretionary grants, while banking the Section 12H tax allowance against taxable income. For South African Qualifying Small Enterprise employers and Generic employers chasing B-BBEE Skills Development points, Section 12H becomes the financial engine behind the Learnership pillar of the Amended Codes scorecard.
Where this term lives in law
Income Tax Act 58 of 1962
Sections: 12H
The principal statute governing the taxation of individuals and companies in South Africa.
Skills Development Act 97 of 1998
Sections: 16, 17
Creates the SETA framework and governs learnerships, apprenticeships, and skills planning in South Africa.
Broad-Based Black Economic Empowerment Act 53 of 2003
Promotes economic transformation through broad-based black economic empowerment measures.
Frequently asked questions
How much is the Section 12H learnership allowance?
For learners at NQF levels 1 to 6, the annual and completion allowances are each R40 000 per learner, or R60 000 per learner with a disability. For NQF levels 7 to 10, the allowance is R20 000 annually and on completion. The employer claims the annual allowance each year the learnership runs, and the completion allowance in the year the learner achieves the qualification. Rates are set out in Section 12H(2)–(4) of the Income Tax Act 58 of 1962.
Who qualifies to claim Section 12H?
Only the employer registered as the party to a SETA-registered learnership agreement under the Skills Development Act 97 of 1998. The learnership must be properly registered with the relevant SETA, the agreement must be in writing containing the prescribed particulars, and the employer must be the income-tax registered employer of the learner. Section 12H(5) disqualifies employers who were already employing the learner immediately before the learnership began (except in prescribed circumstances).
How does Section 12H interact with the Skills Development Levy?
They are separate but reinforcing. The SDL is a payroll tax payable under the Skills Development Levies Act 9 of 1999, calculated at 1% of leviable payroll. Employers reclaim a portion of SDL through SETA mandatory and discretionary grants for approved training, including learnerships. Section 12H is an additional income-tax deduction. A well-run learnership programme effectively yields three benefits — SDL grant recovery, the Section 12H deduction, and B-BBEE Skills Development scorecard points.
What if the learnership is terminated early?
Section 12H(3A) addresses early termination. Where a learner terminates the learnership before completion, the employer can still claim the annual allowance for the year of termination on a pro-rata basis, calculated by reference to the number of full months the learnership ran during the year of assessment. No completion allowance is claimable where the learner does not achieve the qualification, so the financial case for supporting learners through to completion is material.
Contract templates using this term
3 templates reference Section 12H Learnership Allowance.