Relocation allowance tax in South Africa: exempt or taxable

Employer-paid relocation costs are exempt from tax under section 10(1)(nB) of the Income Tax Act only where the employer reimburses actual, proven relocation expenditure or pays the supplier directly. A round-sum cash "relocation allowance" paid without proof is fully taxable at your marginal rate. The old concession that let an employer pay a tax-free amount equal to one month's salary fell away on 1 March 2016.

What section 10(1)(nB) actually exempts

When your employer moves you, whether that is a transfer, a new appointment, or a termination of employment, the cost of physically changing homes is a private expense. If the employer carries that cost, it becomes a benefit in your hands, the kind of thing that is normally taxed as remuneration in the same way a company car fringe benefit or a cash bonus is. Section 10(1)(nB) carves out an exemption for this particular benefit, limited to the real expenditure incurred as a result of the relocation.

How the money reaches you decides the outcome. The exemption applies where the employer pays the service provider directly, or reimburses you against proof of what you actually spent. If instead you receive a cash sum on the assumption that you will spend it on moving, there is no expenditure to set it against, so the full amount counts as remuneration and PAYE is withheld.

The one-month-salary tax-free allowance no longer exists

For years an employer could pay a tax-free relocation allowance of up to one month's basic salary towards settling-in costs, with no invoices required. SARS withdrew that practice with effect from 1 March 2016. Since then a relocation allowance paid without proof of expenditure is not exempt, and the employer must deduct employees' tax from it.

Losing the automatic tax-free month has an upside worth understanding. The exemption for actual costs is not capped at one month's salary, so a well-documented reimbursement of a large genuine move can be exempt in full. What it costs you is paperwork, because you have to keep and produce the invoices.

Which costs qualify

SARS lists examples of relocation expenditure that an employer can reimburse tax-free, provided you can show you actually incurred them:

• Bond registration and legal fees on a new residence you have bought
• Transfer duty on the new residence
• Cancellation fees for cancelling the bond on your previous residence
• Agent's commission on the sale of your previous residence
• New school uniforms
• Replacement of curtains
• Motor vehicle registration fees
• Telephone, water and electricity connections

Section 10(1)(nB) also covers the transport itself: moving the employee, the household members, and their personal goods from the old home to the new one. That is the core situation the exemption was written for. Every item shares the same condition, which is proof, so keep each invoice and receipt so the employer can show the reimbursement matches what was really spent. Ongoing travel for work is a separate matter handled through a travel allowance, not this exemption.

Worked example: cash allowance versus reimbursement

Take an employee with taxable income of R450,000 for the 2026 year of assessment (1 March 2025 to 28 February 2026), who is relocated by their employer.

Case A: the employer pays a round-sum "relocation allowance" of R30,000 in cash, with no invoices. Because nothing supports it, the R30,000 is remuneration. It stacks on top of the R450,000, landing in the 31% bracket, which on the 2026 table runs from R370,501 to R512,800. Both R450,000 and R480,000 sit inside that bracket, so the whole R30,000 is taxed at 31%.

• Tax on R450,000: R77,362 + 31% x (R450,000 − R370,500) = R77,362 + 31% x R79,500 = R77,362 + R24,645 = R102,007
• Tax on R480,000: R77,362 + 31% x (R480,000 − R370,500) = R77,362 + 31% x R109,500 = R77,362 + R33,945 = R111,307
• Extra tax on the R30,000: R111,307 − R102,007 = R9,300

The primary rebate of R17,235 applies in both calculations, so it cancels out and leaves the extra tax at R9,300. The employee keeps R30,000 less R9,300, which is R20,700 of the cash allowance.

Case B: instead of cash, the employer reimburses R30,000 of actual movers' and transport invoices, or settles the moving company's bill directly. Under section 10(1)(nB) the benefit is exempt, so no PAYE is withheld and nothing arises on assessment. The employee has R30,000 of the move covered, against R20,700 of usable cash in Case A. The R9,300 gap is exactly the tax the round-sum route triggers.

The two routes are worth roughly the same gross rand, but the cash version is taxed at your marginal rate, much like a bonus or a 13th cheque, whereas the reimbursement carries no tax at all. You can check what a cash allowance would cost you at your own income level with the basic income tax calculator. Where the timing allows it, agree the reimbursement with your employer before the move rather than taking the cash.