Payroll Pitfalls: How to Stop SARS from Bleeding Your Practice
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SARS isn’t playing anymore.
With a R35 billion revenue boost target and a spotlight on payroll, it’s clear: PAYE is now one of SARS’ biggest cash cows, and the easiest place for them to audit. You're a sitting duck if you’re still treating payroll like a back-office admin task. SARS has gone digital, aggressive, and unapologetically ruthless. Payroll tax errors are no longer just mistakes, they’re liabilities. Below, we explain what accountants must know to keep their clients and practices safe.
💸 What is income? What gets taxed?
Let’s make this simple. If it puts money in your pocket or saves you from spending it, it’s income. Whether it’s salary or a sneaky benefit, SARS sees it all.
Here’s what’s taxable:
Salaries, bonuses, commissions, overtime
Fringe benefits: company car, subsidised housing, interest-free loans
Travel, entertainment, and subsistence allowances (mostly 80% taxable)
Tax paid on behalf of the employee (“tax-on-tax” = double the trouble)
Share schemes and equity-based incentives (taxed when they vest)
📶What’s not taxed (with conditions):
Employer transport from home to office
In-house canteen meals (if offered to all staff)
Bursaries (only if structured right and not repayable)
Reimbursed business expenses (with documentation)
Cellphone/Internet—only if over 50% is business use
✂️ What can be deducted before calculating PAYE?
Before you submit that monthly PAYE to SARS, here’s what you can legally subtract:
Pension/provident/RA fund contributions (within 27.5% or R350K cap)
Medical aid tax credits (Section 6A + 6B)
Donations to registered PBOs (up to 5% with an 18A receipt)
Additional PAYE (only if requested in writing by the employee)
Important: You cannot just deduct PAYE "for safety" or not deduct it "as a favour." SARS has
🧰Practical Tips to Safeguard Your Practice
You’re not just calculating tax, you’re walking a tightrope. Here’s how to stay upright:
Review your policies and perks before SARS does
Every benefit you give an employee—whether it’s a car, accommodation, or a bursary—must be clearly defined, correctly taxed, and legally backed. That starts with reviewing your employment contracts and internal policies.
Ask yourself:
Is this perk clearly documented in writing?
Have we assigned the right SARS tax code in payroll?
Does it fall under Schedule 4 (PAYE) or Schedule 7 (fringe benefits)?
🔴 Example: If you waive an employee’s debt (like unpaid school fees), but call it a “staff discount” or a “benefit”, SARS may treat it as a debt waiver—not a fringe benefit. That triggers tax, penalties, and interest—and it could go back five years.
Use an “Employee Benefit Form”
Every benefit you give an employee, whether it’s a car, accommodation, or a bursary must be clearly defined, correctly taxed, and legally backed. That starts with reviewing your employment contracts and internal policies. Ask yourself:
Is this perk clearly documented in writing?
Have we assigned the right SARS tax code in payroll?
Does it fall under Schedule 4 (PAYE) or Schedule 7 (fringe benefits)?
🔴 Example: If you waive an employee’s debt (like unpaid school fees), but call it a “staff discount” or a “benefit”, SARS may treat it as a debt waiver—not a fringe benefit. That triggers tax, penalties, and interest—and it could go back five years.
Be precise. Structure perks properly, and always map each one to the correct tax rule.
Run everything through payroll
Every payment linked to employment—no matter how small—must run through your payroll system. That includes:
Study bursaries
Reimbursed lunches
Work-from-home internet stipends
💥 If it’s not processed through payroll, it doesn’t show up on tax records—and SARS will treat it as non-compliant. No audit trail = big trouble.
Do annual PAYE reviews
Payroll systems aren’t perfect—and neither is HR. That’s why your tax expertise needs to step in regularly. At least once a year, do a full PAYE health check:
Are fringe benefits correctly taxed?
Are travel and subsistence allowances handled by the book?
Are IRP5 codes accurate and complete?
⚠️ Don’t wait for a SARS letter to start caring. Find and fix issues before they become penalties.
Train your team
HR doesn’t always “get” tax. Payroll doesn’t always “see” risk. Get everyone on the same page.
Use the VDP when things go wrong
Mistakes happen. Fix them before SARS finds them, and you’ll avoid penalties and prosecutions.
The employer is SARS’ agent, not the employee’s. If something goes wrong, you’re the one footing the bill.
🧠 In Summary
PAYE is no longer just about payroll—it’s about protection. Protection from penalties, from SARS audits, and from practices losing credibility.
If you manage PAYE, you manage risk. Do it right, and your clients will thank you. Do it wrong, and you might be the one paying the price.
Learn more on Payroll Taxes by joining CIBA’s May 2025 Tax Happy Hour on payroll taxes.
What You Will Learn
Payroll Taxes: Avoid Costly PAYE Mistakes Before SARS Comes Knocking
Roughly 40% of SARS’ total revenue comes from PAYE. And yet, it’s the most overlooked tax risk. Too many CFOs blindly trust the payroll system—until SARS raises a red flag.
This webinar will show you how to take control of PAYE and avoid being the one held liable when things go wrong. If you’re a tax practitioner, accountant, or payroll manager dealing with PAYE, this session is a must, the risks of payroll errors affect you and your bottom line.
