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Assurance FAQs

Treasury Regulations 3.1.4 and 3.1.5 require that members of audit committees must be independent. For this reason, the payments made to the Members do not constitute “remuneration” as defined in the Fourth Schedule to the Income Tax Act, 1962 (the Act). Members are independent contractors under the common law and for purposes of the main body of the Act, and also for PAYE purposes under the Fourth Schedule. No PAYE is therefore required to be withheld from payments to Members.

If an Institution and Member agree to voluntary deductions of PAYE, an Employees’ Tax certificate (IRP5) must be issued. The total amount paid or payable, before the deduction of PAYE, must be disclosed under code 3616 on the IRP5. The total must include any allowances/reimbursements paid to the Member.

These amounts will be taxable on assessment of the Members’ income tax returns, but the PAYE deducted will be set off against the tax liability.

It should be considered that the same principle applies to audit committee members of municipalities appointed under section 166 of the Local Government: Municipal Finance Management Act 56 of 2003. Payments to them are not subject to compulsory employees’ tax withholding, although a municipality and an audit committee member may agree to voluntary deductions.

It is important that the AC build a collaborative and cooperative relationship with management.  This matter therefore requires a tactful response.  There are the regular avenues that can be used to address this matter such as:

  • stipulating the compulsory attendance of senior management at the AC meetings
  • ensuring that MFMA Circular 65 is adopted by council

There are also additional methods such as the one deployed by the audit committee to meet with management to address the matter and to understand the reasons for non-attendance.  It would be helpful if the AC informs the MM and CFO, in advance, of the topics for each meeting as it aligns with the AC annual work plan and calendar. 

Remuneration will only be applicable to officials employed outside the public service. No remuneration for participating in audit committees will be payable to officials employed at national, provincial and local government, its agencies or other entities regarded as falling within the definition of an organ of state, except for out-of-pocket expenses which may be reimbursed.