What is Code 3605 on a South African Payslip?
Your annual bonus or 13th cheque — why so much PAYE was deducted, how the aggregation method works, and a step-by-step example of the tax calculation.
3605Code 3605 is your annual payment or bonus — a 13th cheque, performance bonus, or year-end payment separate from your regular salary. It is fully taxable under PAYE at your marginal tax rate. It appears separately from your code 3601 salary on both your payslip and IRP5 certificate.
What Code 3605 Means
Code 3605 is an income code in the 3600 series — the same group as your regular salary (3601), overtime (3607), and commission (3606). It specifically captures once-off annual payments: your 13th cheque, annual performance bonus, year-end payment, or any other non-recurring lump sum your employer pays you separately from your monthly salary.
The reason SARS uses a separate code for bonuses rather than folding them into code 3601 is traceability. By keeping these amounts distinct, SARS can verify that your employer calculated the PAYE on your bonus correctly and can identify the nature of every payment when assessing your annual return.
On your IRP5, the code 3601 and code 3605 amounts are shown separately, but both contribute to your gross remuneration total — the figure SARS uses to calculate your full annual PAYE liability.
Why So Much Tax Is Deducted From Your Bonus
The most common question South African employees ask in November and December is why their 13th cheque arrives with a much larger tax deduction than expected. The answer lies in how SARS requires employers to calculate PAYE on annual bonuses: the annual aggregation method.
Under this method, your employer does not simply apply a flat rate to the bonus. Instead, they:
- Take your regular monthly salary and multiply it by 12 to get your projected annual income
- Add your bonus to that projected annual figure
- Calculate the total annual PAYE on the combined amount using the SARS tax brackets
- Subtract the PAYE already deducted from your salary during the year to date
- Deduct the remaining balance from your bonus payment
Because the bonus is added on top of a full year's salary, it is taxed entirely at your marginal tax rate — the rate that applies to the top slice of your income. For most salaried employees in South Africa this is 26% or 31%, and for higher earners up to 39% or 41%.
Worked Example — Code 3605 at R25,000 Salary + R25,000 Bonus
An employee earns R25,000 gross per month (R300,000 per year, code 3601). In December they receive a R25,000 bonus (code 3605). Here is how the PAYE on the bonus is calculated using the aggregation method.
| Step | Without Bonus | With R25,000 Bonus |
|---|---|---|
| Annual code 3601 salary | R300,000 | R300,000 |
| Annual code 3605 bonus | — | R25,000 |
| Combined annual taxable income | R300,000 | R325,000 |
| Tax on first R245,100 @ 18% | R44,118 | R44,118 |
| Tax on remainder @ 26% | R14,274 | R20,774 |
| Gross annual tax | R58,392 | R64,892 |
| Less: Primary rebate | − R17,235 | − R17,235 |
| Total annual PAYE | R41,157 | R47,657 |
| Additional PAYE on bonus | — | R6,500 |
| Effective tax rate on bonus | — | 26% |
| Net bonus received after PAYE | — | R18,500 |
The R25,000 bonus results in a net payout of R18,500 — R6,500 goes to SARS as PAYE at the marginal rate of 26%. Use our Annual Bonus Tax Calculator to calculate the exact net payout for your own salary and bonus amount.
Frequently Asked Questions
What does code 3605 mean on my payslip?
Code 3605 is your annual bonus or 13th cheque — a once-off annual payment separate from your monthly salary. It is fully taxable under PAYE and appears separately from your code 3601 salary on your payslip and IRP5. The PAYE on your bonus is calculated using your marginal tax rate via the annual aggregation method.
Why was so much tax deducted from my bonus?
Your employer uses the annual aggregation method — they add your bonus to your projected annual salary and calculate PAYE on the combined total. This means your bonus is taxed at your marginal rate (the rate on the top portion of your income), which is typically 26% to 41% depending on your salary. It can feel like a lot because the full tax on the bonus is deducted in a single month rather than spread across the year.
Is a 13th cheque the same as code 3605?
Yes. A 13th cheque — an annual bonus equal to one month's salary — is reported as code 3605. Any once-off annual payment, whether called a 13th cheque, performance bonus, year-end award or profit share, is classified as code 3605 if it is a separate, non-recurring annual payment distinct from your regular monthly salary.
Is there any tax-free portion on my annual bonus?
No. Annual bonuses under code 3605 are fully taxable — there is no tax-free threshold for employment bonuses in South Africa. You can reduce the effective tax rate by making additional retirement fund contributions in the same tax year, which increases your Section 11F deduction and reduces overall taxable income. Consult a financial advisor before making lump sum contributions for this purpose.
Will SARS tax my bonus again when I file my return?
No — if your employer used the correct aggregation method, the full PAYE on your bonus was already deducted. Your code 3605 amount and the associated PAYE are both captured in your IRP5 under code 4102. When you file, SARS verifies the total tax on your combined income matches what was deducted — if the calculation was correct, there is no additional tax due on the bonus.
What if my bonus is paid in instalments — is it still code 3605?
It depends on the nature of the payment. Annual bonuses paid in instalments may still be coded 3605. Regular monthly incentives or commissions are more likely coded 3601 (regular remuneration) or 3606 (commission). The distinction is whether the payment is a fixed annual award or a variable monthly incentive — ask your payroll department which code applies to your specific arrangement.
Related Payslip Codes
Full explainer for code 3606 coming soon.