s11(nA) Refund
When an employee refunds their employer an amount that was previously included in their taxable income, section 11(nA) of the Income Tax Act allows the refund to be deducted from their taxable income. You can use the s11(nA) Refund system item to recover the refund through payroll – individually or in bulk. The item deducts the refund from the employee's net pay, reduces their taxable income for PAYE, and reports the refund on their IRP5/IT3(a).
Deciding whether a refund qualifies
SimplePay processes the refund, but you, as the employer, are responsible for deciding whether it qualifies under section 11(nA). A refund qualifies only if all of the following apply:
- The amount was previously included in the employee's taxable income
- The employee refunded the amount in money, not in goods or services
- The refund isn't the correction of an administration error
- The deduction isn't more than the amount that was originally taxed
You're also responsible for confirming that the deduction from the employee's net pay is lawful in terms of section 34 of the Basic Conditions of Employment Act (BCEA).
👉 How-To Guides¶
Before you start
- Use this item only for refunds you're recovering through payroll. If the employee has already paid the money back to you directly, don't add the item, or you'll recover the refund twice.
- The item can only be used on payslips dated 1 March 2025 or later.
- Enter no more than the payslip's taxable income as the Refund amount. If the refund is more than that, spread it across several payslips. See Refunds larger than the payslip's taxable income.
How to add the s11(nA) Refund item¶
SimplePay doesn't spread a refund across payslips for you. To recover a refund over more than one pay period, add the item to each payslip, and enter no more than that payslip's taxable income as the Refund amount.
Individually¶
- Go to Employees, and select the relevant employee.
- Next to the Payslip Inputs heading, click the Add button.
- Click s11(nA) Refund (under Deduction).
- Enter the positive Refund amount.
- Click Save.
In bulk¶
- Go to Employees > Bulk Actions.
- Under Payroll Inputs, click Payslip Inputs.
- Confirm that your filters are correct (Pay Point, Pay Frequency, and Period).
- Click the first drop-down, and select "s11(nA) Refund" (under Deduction).
- In the Add column, tick the boxes for the relevant employees.
- Complete the Refund amount column with a positive amount.
- Click Save.
📌 Quick References¶
Item details¶
- System item name
- s11(nA) Refund
- Category
- Deduction
- Frequency
- Once-off (doesn't carry forward to next payslip)
- SARS code(s)
- 4042 and 4588
- Entry method(s)
- Individual and bulk
- Use case example
- Employee repaying sign-on or retention bonus after leaving before agreed period ends
- Available from
- Payslips dated 1 March 2025 onwards
Statutory deductions¶
- Effect on PAYE
- Reduces taxable income, capped at the payslip's taxable income
- Effect on SDL
- Reduces the amount SDL is calculated on
- Effect on UIF
- None
📚 Explanation¶
How the item affects the payslip¶
When you add the item, two lines appear on the employee's payslip. Both use the word "Repayment" rather than "Refund":
- s11(nA) Repayment under Deduction, which reduces the employee's net pay by the full Refund amount
- s11(nA) Repayment Deduction under Taxable Income Deduction, which reduces the employee's taxable income
The s11(nA) Repayment Deduction line doesn't show if you've ticked the Do not show Taxable Income Deductions box in your payslip settings. The deduction still applies to the payslip.
Because the refund is a taxable income deduction, PAYE and the Skills Development Levy (SDL) are calculated on the reduced amount. The Unemployment Insurance Fund (UIF) contribution doesn't change.
Refunds larger than the payslip's taxable income¶
The taxable income deduction can't be more than the payslip's taxable income, so taxable income is reduced to R 0 rather than below it. The full Refund amount is still deducted from net pay. What happens next depends on the employee's other pay for the period:
- Net pay stays above R 0: You can finalise the payslip, but the employee misses out on the part of the deduction that is more than taxable income. They have to claim it from SARS on assessment, when they submit their tax return. This can happen when the employee also receives non-taxable pay, such as an expense claim.
- Net pay falls below R 0: You can't finalise the payslip until you reduce the Refund amount. You can add the rest on a later payslip.
We recommend avoiding the first situation. Enter no more than the payslip's taxable income on each payslip, and spread the rest of the refund across later payslips. The employee then gets the full deduction on each payslip, and there's nothing to claim on assessment.
Click here to see an example of a refund that is larger than the payslip's taxable income.
In their first pay period of the tax year (March), an employee earns a basic salary of R 8,000 and receives an Expense Claim of R 5,000, which isn't taxable. They refund R 10,000 through payroll.
| Item | Amount |
|---|---|
| Basic Salary | R 8,000 |
| Expense Claim (not taxable) | R 5,000 |
| Total pay | R 13,000 |
| Taxable income before the refund | R 8,000 |
| s11(nA) Repayment Deduction (reduces taxable income, limited to taxable income) | R 8,000 |
| Taxable income after the refund | R 0 |
| PAYE | R 0 |
| UIF | R 80 |
| s11(nA) Repayment (full refund, deducted from net pay) | R 10,000 |
| Net pay | R 2,920 |
Because the Expense Claim isn't taxable, the employee's total pay for the period (R 13,000) is more than the refund, so net pay stays above R 0 (R 13,000 − R 10,000 − R 80 = R 2,920). The s11(nA) Repayment Deduction is limited to R 8,000, but the full R 10,000 comes off net pay as the s11(nA) Repayment, so the employee can claim the remaining R 2,000 deduction on assessment, when they submit their tax return. To avoid this, enter no more than R 8,000 on this payslip, and add the remaining R 2,000 on a later payslip.
How the refund is reported to SARS¶
The refund is reported to the South African Revenue Service (SARS) on the employee's IRP5/IT3(a) under two codes, which are available from the 2026 tax year (1 March 2025 onwards):
| SARS Code | IRP5/IT3(a) Description | Amount reported |
|---|---|---|
| 4042 | Amounts deducted for PAYE in terms of s11(nA) for remuneration refunded by the employee | The amount deducted from taxable income (s11(nA) Repayment Deduction) |
| 4588 | Total amount repaid by the employee for a s11(nA) recoupment | The full refund (s11(nA) Repayment) |
The two amounts are the same unless the refund is larger than the payslip's taxable income, as in the example.
🔍 FAQs¶
Why can't I finalise a payslip with the s11(nA) Refund item on it?
There are two possible reasons:
- The payslip is dated before 1 March 2025: The item can only be used from the 2026 tax year. Remove the item from the payslip.
- Net pay is negative: The Refund amount is more than the employee's total pay for the period. There are a couple of options:
- You can reduce the Refund amount, and recover the rest on a later payslip.
- You can remove the item from the payslip with Skip Items (in the Payslip column, next to Payslip Notes). If you're considering this, contact Support to discuss whether it suits your situation.
Can I use this item if the employee has already paid the refund back to me?
No. The item deducts the refund from the employee's net pay, so using it for a refund you've already received would recover the money twice.
Why are the amounts for codes 4042 and 4588 different?
Code 4042 shows the amount deducted from taxable income, which can't be more than the payslip's taxable income. Code 4588 always shows the full refund. To keep them the same, enter no more than the payslip's taxable income on each payslip. See Refunds larger than the payslip's taxable income for an example.
Can I capture s11(nA) refunds as take-on balances?
Yes. From the 2026 tax year, you can enter codes 4042 and 4588 as tax take-on balances. If you enter a value for 4042, you must also enter one for 4588. See the Tax Take-On Balances help page.