Tax and SARS knowledge base
Is a 13th cheque taxed differently from my salary?
Is a 13th cheque taxed differently from my salary?
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Direct answer
A 13th cheque that meets the annual-payment definition is not taxed using a special flat "13th cheque rate". SARS calculates employees' tax on an annual payment by annualising remuneration for the tax period, adding the annual payment and calculating the difference in tax.
SARS also records that an employer may spread employees' tax on a 13th cheque over a tax year. If the employee resigns before the bonus is due, that approach can result in an over- or under-deduction.
What this means in practice
The key question is not the name "13th cheque" on its own. SARS's annual-payment definition applies to qualifying lump-sum net remuneration under the employee's conditions of service or employer practice, or an amount calculated without reference to a period. The employment terms and payroll treatment are therefore important.
Where the payment is an annual payment, SARS describes a calculation that compares tax on the annual equivalent of remuneration with tax on the annual equivalent plus the annual payment. The difference is the employees' tax deductible from the annual payment. This is why a payslip can show a deduction that does not look like ordinary monthly salary PAYE.
SARS's employer-reconciliation guidance also notes that some employers spread employees' tax on a 13th cheque over the tax year. This is a payroll approach that can create an over- or under-deduction where the employee resigns before the bonus is due. It does not create a universal rule that every employer must spread the tax, or that every employee will owe or receive a particular amount.
Step-by-step
- Check the employment terms.
Read the employment contract, bonus policy or other terms that describe the 13th cheque. Identify whether it is a qualifying annual payment, when it becomes payable and what happens if employment ends before payment.
- Review the payslips.
Keep the payslip for the payment period and any earlier payslips where payroll appears to have spread tax over the year. Check the 13th-cheque amount and PAYE deducted.
- Ask payroll for a calculation explanation.
Ask whether payroll treated the payment as an annual payment, how the employees' tax was calculated or spread and what IRP5 code will be used. Keep the explanation with the terms and payslips.
- Check the year-end certificate.
Compare the IRP5 or IT3(a) with the payment records and payroll explanation. SARS says annual payments are reflected under code 3605 when that treatment applies.
- Review the annual return and assessment.
Check the certificate information on the ITR12 and retain the ITA34 assessment. Do not assume that the tax reflected on one payslip is your final annual tax position.
- Preserve evidence if employment ended early.
If you resigned before a bonus became due, retain the employment end date, policy, payslips and payroll correspondence. These records are relevant where payroll spreading has led to an apparent over- or under-deduction.
Documents and records to keep
- Employment contract and bonus or 13th-cheque policy.
- Payslips for the year and payment period.
- Payroll explanation of the PAYE calculation or spreading method.
- IRP5 or IT3(a) certificate.
- ITR12 and ITA34 assessment.
- Employment-termination records, if relevant.
Important limits and exceptions
Do not publish or rely on a flat 13th-cheque tax rate. SARS's method depends on whether the payment meets the annual-payment definition and on remuneration for the tax period.
The payroll-spreading point is not a promise of a refund or a balance payable. SARS says an over- or under-deduction can arise if an employee resigns before a spread 13th cheque is due. The final outcome depends on the records and annual assessment.
This article does not determine whether an employment contract entitles an employee to a 13th cheque, or whether the employer was contractually allowed to withhold it after resignation.
When to get tailored advice
Get tailored help if the payment was withheld, spread over a year, paid after resignation, reported under an unexpected certificate code or produces an assessment you cannot reconcile. Help is also useful if the 13th cheque is combined with another bonus or payment.
TaxProof can help organise the contract, policy, payslips, certificate and assessment records for review. The employer applies payroll PAYE and SARS determines the final assessment.
Related TaxProof guides
- Employer IRP5 and EMP501 guide
- Is a performance bonus taxable in South Africa? (B02-IND-009)