By Chris Herbst, Chartered Business Accountant in Practice (CBAP) with CIBA, General Tax Practitioner (GTP) with SAIT, Stellenbosch University. Team registered with SAIT, SAIPA and CIBA.
Most employees who see a medical code on their IRP5 expect 3810, the employer's contribution to a medical scheme. Code 3813 is a different benefit. It shows medical, dental, hospital, nursing or medicine costs that your employer paid directly for you or your family, outside a medical scheme. This guide explains what the code means, how SARS values it, when it carries no value, and how it connects to code 4024 and your additional medical expenses tax credit on the ITR12.
What Is SARS Code 3813 on an IRP5?
Code 3813 is the source code for the taxable benefit of medical services costs your employer incurred on your behalf. The SARS guide for codes applicable to employees tax certificates defines it as medical costs incurred on behalf of an employee in respect of medical, dental and similar services, hospital and nursing services or medicine, and marks it as subject to PAYE.
Is code 3813 the same as code 3810?
No. Code 3810 is the employer's contribution to a registered medical scheme on your behalf. Code 3813 covers costs the employer paid outside a medical scheme, such as a specialist's account, a hospital bill or medicine the company settled for you. The SARS guide for employers in respect of fringe benefits excludes medical scheme contributions from the 3813 benefit, because those fall under 3810 instead. Our guide to SARS code 3810 covers the scheme contribution side.
What is code 3863?
Code 3863 is the same benefit where it relates to foreign service income. The SARS codes guide says to use 3863 only for foreign services income, so most employees working in South Africa see 3813.
Which part of the Income Tax Act creates the benefit?
The benefit comes from paragraph 2(j), read with paragraph 12B, of the Seventh Schedule to the Income Tax Act 58 of 1962. Paragraph 2(j) deems a taxable benefit to exist when an employer incurs these medical costs, and paragraph 12B sets the value.
How Does SARS Value a 3813 Medical Costs Benefit?
The value of the benefit is the amount your employer incurred, directly or indirectly, on medical, dental and similar services, hospital services, nursing services or medicines for you, your spouse, your children, or another relative or dependant. The SARS fringe benefits guide states this as the cash equivalent reported under code 3813.
Does it matter who in my family received the treatment?
No. The guide states that code 3813 carries the costs paid on behalf of the employee whether the expenses were for an immediate family member or for other relatives or dependants. The benefit is taxed in your hands as the employee.
What if the employer pays for a group and cannot split the cost per person?
Where the employer pays in a way that cannot be attributed to a particular employee and their family, paragraph 12B deems each employee's share to be the total the employer incurred for all employees and their families during the period, divided by the number of employees entitled to use those services.
When is PAYE deducted on the benefit?
The SARS fringe benefits guide states that employees' tax must be deducted in the month in which the benefit accrues. That is why a large medical bill your employer settled can push up your PAYE in a single month.
When Does a 3813 Benefit Have No Value?
Paragraph 12B gives a no-value rule for several situations. Where one applies, the benefit is not taxed and should not appear as a taxable amount under 3813. The SARS fringe benefits guide lists them as follows.
Retired employees, dependants and employees aged 65 or older
There is no value where the benefit is derived by a person who retired from that employer through superannuation, ill-health or other infirmity, by the dependants of an employee who died in service or after such a retirement, or by an employee who is 65 years or older.
Treatment for prescribed minimum benefits
There is no value on treatment listed in the categories of prescribed minimum benefits under the Medical Schemes Act, provided under an employer's scheme or programme, where the conditions in paragraph 12B are met. Those conditions turn on whether the programme is an approved exempt scheme, and on whether the employee and family are beneficiaries of a registered medical scheme and, if so, whether the cost is recovered from it.
Services required by law or provided at work
There is no value where the services or medicines are provided to comply with a South African law, or where the employer provides the services to employees in general at their place of work for the better performance of their duties. A workplace clinic for occupational health checks is the common example.
How Does Code 3813 Link to Code 4024?
The SARS fringe benefits guide tells employers to report two codes for this benefit: 3813 for the cash equivalent of the benefit, and 4024 for the medical costs deemed to be paid by the employee. The first adds the amount to your income. The second records that, for medical credit purposes, you are treated as having paid those costs yourself.
Why does the deemed payment matter?
Medical expenses paid by someone other than you are normally ignored for the additional medical expenses tax credit. The SARS Guide on the Determination of Medical Tax Credits (IT07) sets out an exception in section 6B(4): qualifying medical expenses paid by your employer count, to the extent that the amount has been included in your income as a taxable benefit.
So am I taxed and then credited?
Yes, in that order. The 3813 amount is taxed as part of your remuneration, and the same amount then becomes part of your qualifying medical expenses when SARS calculates your additional medical expenses tax credit. Whether the credit gives back part of the tax depends on your age, any disability in the family, your medical scheme contributions and, for most taxpayers, your taxable income.
The table below sets out the codes you are likely to see together on an IRP5 for medical benefits, using the definitions in the SARS guides.
- 3810: What it shows: Employer medical scheme contributions; Effect on your return: Taxable benefit in income
- 3813: What it shows: Employer-paid medical costs; Effect on your return: Taxable benefit in income
- 4024: What it shows: Medical costs deemed paid by you; Effect on your return: Counts towards medical credit
- 4005: What it shows: Medical scheme contributions; Effect on your return: Scheme fees credit
How Does the 3813 Amount Affect Your Medical Tax Credit?
The additional medical expenses tax credit is calculated in one of three ways under section 6B, and the IT07 guide and the SARS Comprehensive Guide to the ITR12 explain each one. The 4024 amount enters each calculation as a qualifying medical expense.
If you are 65 or older
The ITR12 guide states that the credit is 33.3 per cent of medical scheme fees above three times the medical scheme fees tax credit, plus 33.3 per cent of all qualifying medical expenses. In practice a 3813 benefit is rare at this age, because the no-value rule for employees aged 65 or older applies.
If you, your spouse or your child has a disability
The IT07 guide applies the same 33.3 per cent calculation where the taxpayer, a spouse or a child is a person with a disability. The worked examples in IT07 show an employer-paid amount taxed under paragraph 2(j), read with paragraph 12B, alongside qualifying expenses.
All other taxpayers
The IT07 guide states that the credit is 25 per cent of the amount by which the sum of scheme contributions above four times the medical scheme fees tax credit and qualifying medical expenses exceeds 7.5 per cent of taxable income. For many salary earners under 65, the 7.5 per cent floor means the 3813 amount is taxed and produces little or no credit.
What Are the Practical Steps for Checking Code 3813 on Your ITR12?
Work through these steps before you accept an auto-assessment or file your ITR12 on eFiling.
Step 1: Read the IRP5 or IT3(a) from your employer
Find code 3813 in the income section of the certificate and code 4024 in the deductions section. Compare the 3813 amount with what your employer paid for you during the tax year, from 1 March to the end of February.
Step 2: Open the ITR12 on eFiling
Log in to eFiling, open Returns, select the Personal Income Tax return (ITR12) for the year, and open the IRP5/IT3(a) section. Confirm that the 3813 and 4024 amounts match the certificate your employer gave you. The guide to codes 4001, 4003 and 3817 explains how the rest of the certificate maps onto the return.
Step 3: Check the medical section of the return
In the medical section of the ITR12, complete your medical scheme details from the scheme's tax certificate and list only the qualifying medical expenses you paid yourself. The ITR12 guide asks you to keep proof of qualifying medical expenses paid by you and not recovered from a medical scheme.
Step 4: Ask your employer to correct a wrong certificate
If the 3813 amount is wrong, or a no-value rule applies to you, ask the payroll team to correct the IRP5 and resubmit it to SARS. The certificate belongs to the employer, so the correction comes from them.
Step 5: Keep your records for verification
Keep the employer's confirmation of what it paid, the medical accounts and your scheme certificate. If SARS selects the return, our guide to SARS verification documents explains what to upload.
What Are the Common Mistakes With Code 3813?
These are the errors we see most often when an IRP5 carries a 3813 benefit.
Claiming the same bill twice
The cost your employer paid is already carried by code 4024 as an amount deemed paid by you. Listing the same hospital or specialist account again as an out-of-pocket expense double counts it, and a verification will reverse it.
Confusing 3813 with 3810
3810 is a scheme contribution and 3813 is a direct medical cost. They sit under different paragraphs of the Seventh Schedule and feed different parts of the medical credit, so treating one as the other gives the wrong credit.
Missing a no-value rule
Employees aged 65 or older, retirees from the employer and the dependants of a deceased employee fall within the no-value rule. A 3813 amount reported for them is worth querying with payroll before you file.
Accepting an auto-assessment without checking
An auto-assessment uses the codes your employer submitted. If those are wrong, the assessment is wrong too. Our guide on how to dispute a SARS auto-assessment covers the route when you find an error after the assessment is issued.
Ignoring the PAYE spike
Because PAYE is deducted in the month the benefit accrues, one large payment can cause a high deduction in a single month. That is the correct treatment, not a payroll error, and the annual return squares it off against your total remuneration.
How Does Code 3813 Fit With Your Other Medical Deductions?
Code 3813 is one part of the medical picture on your return. Scheme contributions, out-of-pocket expenses, disability expenses and the scheme fees credit all interact. Our plain-language guide to medical tax deductions explains each piece, and the guide to SARS code 3825 covers another employer-paid benefit that often appears on the same certificate. If you are gathering documents for the return, see the list of documents needed to file your tax return.
Do You Need Help With Code 3813?
If your IRP5 shows a 3813 benefit and you want the medical section of your ITR12 completed correctly, we prepare and file personal tax returns for taxpayers across South Africa. See our personal tax return plans, browse more guides in our personal tax hub, or book a call with a tax practitioner.
