What is Code 3805 on a South African Payslip?
Accommodation fringe benefit explained — how SARS values employer-provided housing, the 17.5% formula, when a discount applies, and what appears on your IRP5.
3805Code 3805 is an accommodation fringe benefit — the taxable value of housing your employer provides. SARS values it at the lower of 17.5% of your annual remuneration (÷ 12 monthly) or the market rental of the property, less any rent you pay. PAYE is deducted on this deemed income monthly.
What Code 3805 Means
Code 3805 covers accommodation provided by an employer to an employee as part of their remuneration package or employment arrangement. This is common in industries such as mining, agriculture, hospitality, security services, and domestic employment — where workers live on-site or near the work location as a condition of service.
Under the Seventh Schedule of the Income Tax Act, employer-provided accommodation is a taxable fringe benefit. The employee is deemed to have received income equal to the value of the accommodation, and PAYE is deducted on that deemed income each month. This means your cash take-home is reduced even though you are not receiving extra cash — you are receiving accommodation instead, and SARS taxes it.
The taxable value is calculated using the lower of two methods: a formula based on your salary, or the market rental value of the property. The Seventh Schedule uses whichever is lower — typically protecting employees in lower-paying roles where 17.5% of salary is less than the market rent.
The 17.5% Formula — How SARS Values Accommodation
| Step | Item | Example |
|---|---|---|
| 1 | Annual remuneration (excluding code 3805 itself) | R360,000 |
| 2 | 17.5% of annual remuneration | R63,000 |
| 3 | Divided by 12 (monthly value) | R5,250/month |
| 4 | Market rental value of accommodation | R7,500/month |
| 5 | Taxable value = lower of Step 3 and Step 4 | R5,250/month |
| 6 | Less employee rental contribution | -R1,000/month |
| Code 3805 taxable fringe benefit | R4,250/month |
At a 26% marginal PAYE rate, this R4,250/month fringe benefit adds approximately R1,105/month to the employee's tax bill — on top of the PAYE on their cash salary. Understanding this helps employees negotiate whether the value of the accommodation justifies the tax cost, or whether a housing allowance (which would also be taxable) might be more transparent.
Where the accommodation is at a site that is geographically remote — such as a mine, farm, or plant — and the employee is required to live there as part of their role, SARS may apply a reduced taxable value or a site-specific determination. If you believe your accommodation falls under a special category, raise this with your employer's payroll team and a registered tax practitioner. The standard 17.5% formula applies unless a specific exemption or reduction can be established.
Frequently Asked Questions
What does code 3805 mean on my payslip?
Code 3805 is an accommodation fringe benefit — the taxable value of housing provided by your employer. SARS deems you to have received income equal to the lower of 17.5% of your annual remuneration divided by 12, or the monthly market rental value of the property, less any rent you pay. PAYE is deducted on this amount monthly and the annual total appears on your IRP5.
How is the accommodation fringe benefit calculated?
The Seventh Schedule uses a two-step calculation: Step 1 — calculate 17.5% of your annual remuneration (excluding the accommodation fringe benefit itself) and divide by 12 for a monthly figure. Step 2 — determine the market rental value of the accommodation. The taxable fringe benefit is the lower of these two amounts, less any rental contribution you make. If you earn R300,000 per year, Step 1 gives R4,375/month. If market rent is R6,000/month, the taxable value is R4,375/month.
Is employer-provided accommodation always taxable?
Generally yes, but a reduced value applies in certain circumstances. If the accommodation is at a work location that is geographically remote from the nearest town with comparable amenities, or if the nature of the employment requires the employee to be on-site, SARS may allow a reduction in the taxable value. If the employer is required by law to provide housing, different rules may apply. These exceptions are narrow — most employer-provided accommodation is valued at the standard formula.
What if I pay rent to my employer?
Your rental contribution directly reduces the taxable fringe benefit. If the formula gives a taxable value of R4,375/month and you pay your employer R2,000/month in rent, only R2,375/month is a taxable fringe benefit under code 3805. If you pay market-related rent — equal to or exceeding the formula value — no fringe benefit arises and code 3805 should not appear on your IRP5.
Does code 3805 appear on my IRP5?
Yes — the annual total taxable value of the accommodation fringe benefit appears as code 3805 on your IRP5 and is included in your gross income. PAYE was deducted monthly on the value. This can significantly increase your tax bill because you are being taxed on the value of accommodation you may have little choice about occupying as a condition of employment.
What is the difference between code 3805 and code 3704?
Code 3805 is a fringe benefit — the value of accommodation provided as part of your employment package, typically on an ongoing basis. Code 3704 is a subsistence allowance for temporary overnight business travel — the daily amount paid when you are away from home on a business trip. If your employer puts you up in a hotel during a site visit, the cost may fall under code 3704 subsistence rules. If you live in employer-provided accommodation as part of your job, it is code 3805.