The allocation of 340m won (around £231,000) formed part of the country's defence budget passed by the country’s parliament earlier this week, according to state news agency, Yonhap.
The creation of what defence officials described as a “decapitation unit” was announced in September, shortly after North Korea conducted its sixth nuclear test.
“The money will be spent on purchasing equipment for the special forces," a defence official told the newspaper. "The equipment includes suicide drones, surveillance drones and grenade machine guns.”
The 1,000-strong unit is tasked with removing the North’s top command-and-control personnel if conflict breaks out. However, some reports have suggested that its role could include cross border raids at night.
The reported that the force was not yet fully operational and lacks specialised aircraft to insert soldiers into North Korean territory.
Talk of so-called decapitation missions by South Korea surfaced in summer 2015, after Washington and Seoul agreed a new format for war planning, the Associated Press reported.
The budget announcement comes after months of simmering tension with the North.
Pyongyang has traded barbs with US President Donald Trump all year as it has launched a series of ballistic missile tests in defiance of United Nations resolutions.
After its most recent – and most powerful – launch, the US and South Korea carried out aerial drills which the North called “confrontational warmongering”.
South Korean President Moon Jae-in is to visit China next week for talks. He has repeatedly said he hopes for a diplomatic solution to the peninsula’s crisis.
Chinese Foreign Ministry spokesman Geng Shuang also recently urged all relevant parties to "maintain calm and restraint and take steps to alleviate tensions and not provoke each other."
He said: “The outbreak of war is not in any side’s interest. The ones that will suffer the most are ordinary people.”
A UN envoy is also currently Pyongyang to discuss “issues of mutual interest and concern”.