What is Section 12H Learnership Allowance?

Section 12H Learnership Allowance was implemented to motivate employers to encourage skills development among their employees.

The amendments to Section 12H Learnership Allowance are effective from 1 October 2016 and applicable to all learnership agreements (an agreement registered with SETA (Skills Education Training Authorities) ) entered into on or after that date but before 1 April 2022.

It must be noted however that the old Section 12H Learnership Allowance criteria will apply to agreements entered into before 1 October 2016.

All examples listed below are based on the new amendments.

The amount payable in terms of the allowance has also been amended to take into account the learner’s qualification level.

The allowance is made up of both an annual allowance and a completion allowance.

The annual allowance is deductible in each year of assessment during which the learnership agreement is in force.

The employer will qualify for the annual allowance if –

• during any year of assessment the learner is a party to a registered learnership agreement with the employer;
• the learner holds an NQF-level qualification from 1 to 10;
• the agreement was entered into pursuant to a trade carried on by that employer; and
• the employer has derived “income” as defined in section 1(1) from that trade.

The allowance applies only to a period during which a learner is a party to a registered learnership agreement with an employer. Thus an employer will not qualify for the annual allowance during any period in which –

• a learnership agreement is not registered; or
• a learner is not in employment.

The annual allowance is a pro rata portion if the learner is a party to a registered learnership agreement for less than 12 full months during the year of assessment.  Apportionment will therefore apply if the learnership agreement commenced or ended partway through the year of assessment.

The completion allowance is a once off allowance available to an employer on completion of the learnership agreement in addition to the annual allowance.

For learnership agreements of less than 24 months, the completion allowance equals one full year’s annual allowance. For learnership agreements of 24 months or more it is multiplied by the number of completed years service.

The completion allowance is only available for contracts one year or longer and is calculated on completed years of service.

The employer will qualify for the completion allowance if –

• during any year of assessment the learner is a party to a registered learnership agreement with the employer;
• the learner holds an NQF-level qualification from 1 to 10;
• the agreement was entered into pursuant to a trade carried on by the employer;
• the learner successfully completed the learnership during the year of assessment; and
• the employer derived “income” as defined in section 1(1) from that trade

There are conditions on how each of these allowances will be apportioned in respect of the period of the registered learnership agreements.

For instance:

A company whose financial year end is February and entered into a learnership agreement (NQF 1) for 16 months on 1 May 2019. The company will be entitled to the following allowances:

28 February 2020

• Annual allowance of R33 333 ( R40 000 x 10/12)

28 February 2021

• Annual allowance of R20 000 (R40 000 x 6/12)
• Completion allowance of R40 000

A longer learnership agreement, say extending for 48 months with a completion allowance of R40 000 for every 12 months completed will result in a completion allowance of R160 000. (R40 000 x 4)

Below is a summary of the NQF criteria for learners:

An employer may not claim an annual or completion allowance if:

• The learner has previously failed to complete a registered learnership agreement within the same organisation; and
• The learnership agreement contains the same modules or material as the previous registered learnership.

Contact Tuffias Sandberg for more information on how the Section 12H Learnership Allowance can benefit your organisation.