13th cheque and annual bonus — tax treatment in South Africa
A 13th cheque is a discretionary annual bonus common in South Africa. SARS requires it to be taxed using the annualisation method — adding the bonus to the annual salary, calculating the new annual tax, and subtracting the tax already withheld.
Payroll Africa Editorial · SARS Payroll Compliance Team
The Payroll Africa editorial team is composed of registered tax practitioners, payroll administrators and BCEA specialists who maintain the SARS PAYE, UIF, SDL and ETI engines that power the platform. Every article is reviewed against the current SARS BRS and Basic Conditions of Employment Act before publication.
- SARS registered tax practitioners
- SAPA-affiliated payroll administrators
- BCEA and LRA compliance reviewers
Last updated 30 Sept 2026
Is a 13th cheque compulsory?
No — the BCEA does not require a 13th cheque. It is a contractual benefit. However, once it is written into a contract of employment or a collective agreement, it becomes enforceable.
How SARS taxes a 13th cheque
The bonus is added to the employee's estimated annual remuneration, the annual PAYE is recalculated, and the additional PAYE (the difference between the new annual tax and the tax that would apply without the bonus) is withheld in the month the bonus is paid.
IRP5 source code 3605
A 13th cheque is reported on the IRP5 under source code 3605 (annual bonus). Payroll Africa applies the correct source code automatically.
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