Tax and SARS knowledge base
Is a long-service award from my employer taxable?
Is a long-service award from my employer taxable?
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Direct answer
Do not assume that a long-service award is tax-free because of its name. SARS's 2026 certificate-code guide says a long-service cash award is excluded from annual-payment code 3605. That statement does not, by itself, make every long-service award tax-free or establish the correct treatment for every award arrangement.
The right next step is to check the employer's payroll treatment and the current certificate guidance for the actual cash, asset or other award you received. An employment-policy question about entitlement to an award is separate from its tax and certificate treatment.
What this means in practice
The description "long-service award" can cover different arrangements. A cash payment, an asset, a voucher or another employer-provided benefit may not have the same payroll record or certificate presentation. The SARS source in this guide gives one narrow coding point: a long-service cash award is not included in the annual-payment code 3605 category.
Start with the award letter or employer policy and the payslip. Ask payroll to explain the amount or benefit, PAYE treatment and the certificate entry it submitted to SARS. Keep the answer in writing, particularly if the award was paid alongside a bonus or final salary payment. It is easier to resolve a source-data error before you submit a return.
An IRP5 or IT3(a) is source data submitted by the employer. Do not treat the ITR12's prepopulated entry as proof that an unclear payment is correct. Compare it against your documents and ask the employer to correct inaccurate source information.
Step-by-step
- Identify the actual award.
Keep the award letter, employer policy and any communication that describes whether the benefit was cash, an asset or another form of award. Do not rely only on a bank-payment reference.
- Check the payroll record.
Obtain the payslip or payroll statement covering the award. Note the amount, payment date and any PAYE deduction shown.
- Ask payroll for the certificate explanation.
Request the IRP5 or IT3(a) code and a short explanation of why payroll used it. SARS's 2026 guide says a long-service cash award is excluded from annual-payment code 3605, but it does not provide a universal answer for all award types.
- Compare the certificate and ITR12.
Check that the certificate agrees with payroll records and that the prepopulated return reflects the certificate. Retain copies or screenshots where a correction is requested.
- Request a source correction if needed.
If the employer agrees that the amount or certificate entry is wrong, ask it to correct the submission to SARS. Do not change a prepopulated certificate entry as a substitute for an employer correction.
- Retain the final filing records.
Keep the certificate, ITR12, assessment and correspondence with the award documents. They help explain the treatment if SARS requests supporting material.
Documents and records to keep
- Award policy, letter and eligibility communication.
- Payslip or payroll statement.
- Bank record for a cash award.
- IRP5 or IT3(a).
- Written payroll explanation and correction correspondence.
- ITR12 and ITA34 assessment.
Important limits and exceptions
The cited SARS source is a certificate-code guide. It supports the limited point about the exclusion of a long-service cash award from code 3605. It does not say that every award is exempt from tax, nor does it supply a tax calculation for your payment.
The form of the award matters. Do not extend the cash-award coding statement to a non-cash award without a payroll explanation and current applicable guidance. This guide also does not decide eligibility for an employer's long-service programme.
When to get tailored advice
Get tailored advice if the award is substantial, includes a non-cash benefit, was paid with a bonus or termination amount, or the employer cannot explain the certificate entry.
TaxProof can help organise the award and payroll records before you raise a focused question with the employer. The employer corrects source data and SARS determines the final assessment.
Related TaxProof guides
- Employer IRP5 and EMP501 guide
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