Section 12B vs Section 12BA: Which Solar Deduction Applies?

Section 12B provides a 125% first-year deduction for qualifying solar PV installations brought into use from 1 March 2023. The extra 25% above cost acts as a direct tax incentive.\n\nThis provision is available to all taxpayers carrying on a trade, with no minimum generation capacity requirement. It covers the full cost of the solar energy system including panels, inverters, batteries, and installation.

Section 12BA allows depreciation of renewable energy assets over three years: 50% in year one, 30% in year two, and 20% in year three. This provision predates the enhanced Section 12B incentive.\n\nSection 12BA applies to assets used in generation of electricity from renewable sources with a capacity of at least 1 MW, unless specific exemptions apply. The three-year write-off is less generous than Section 12B's 125% first-year deduction.

For most businesses installing solar PV systems, Section 12B's 125% first-year deduction is more beneficial. It provides a larger upfront tax benefit and simpler administration with a single-year claim.\n\nSection 12BA may be relevant for larger utility-scale projects or installations that do not meet Section 12B's qualifying criteria. Your tax advisor can confirm which provision applies.\n\nYou cannot claim both provisions on the same asset. Choosing the wrong section could result in a smaller deduction or complications with SARS.

The distinction between these provisions can influence system design decisions. Businesses should confirm which deduction applies before finalising system specifications.\n\nFor systems under 1 MW (the vast majority of commercial rooftop installations), Section 12B is typically the applicable and more favourable provision. Systems over 1 MW may need to consider Section 12BA depending on commissioning date.