SARS is coming after employers in South Africa

South African employers are facing a major payroll compliance crackdown as SARS ramps up audits, data-driven enforcement, and scrutiny of fringe benefits, travel allowances, fuel cards and other common payroll practices.

This follows the appointment of Dr Ngobani Johnstone Makhubu as the new Commissioner of the South African Revenue Service (SARS), explained Tax Consulting SA’s Tax and Remuneration Specialist, Tanya Tosen.

“Based on his previous approach to governance, enforcement, and fiscal discipline, South African employers could expect far less tolerance for ‘grey areas’ and significantly greater scrutiny on payroll compliance,” Tosen said.

“If the new Commissioner’s track record is anything to go by, employers should prepare for a more disciplined, data-driven, and enforcement-led SARS where compliance is expected, not negotiated.”

Tosen noted that, for many organisations, that is where the real risk lies. For years, certain payroll practices have quietly persisted in the background, including but not limited to:

• Fuel cards not being taxed
• Travel allowances loosely substantiated or provided to office-based employees
• Fringe benefits inconsistently applied
• Employer-paid funeral cover not being taxed
• Gap cover company contributions ignored or misclassified
• Late Joiner penalty fees being classified as medical aid contributions
• “Creative” structuring to maximise net pay

“These are not always deliberate acts of non-compliance, but they are exposures. Under a more enforcement-focused SARS, these are no longer rounding errors. They are audit triggers,” Tosen said.

“The reality is that what feels operationally insignificant can translate into material tax risk when applied across an entire workforce over time.”

Tosen explained that SARS has been steadily rebuilding its data capabilities and that, under new leadership, this trajectory is unlikely to slow.

Tax Consulting SA is already seeing increased use of third-party data matching, greater integration between payroll submissions and employee tax filings, and more targeted and frequent employer audits.

“This means discrepancies, even small ones, do not stay hidden for long. A fuel card that is not taxed correctly, or a benefit coded incorrectly on payroll, leaves digital footprints. And SARS is following them,” Tosen warned.

The hidden payroll tax risks facing South African businesses

According to Tosen, many employers underestimate the full impact of payroll non-compliance. This is not just about underpaid PAYE.

It is also about penalties and interest that compound quickly and reputational damage in an increasingly transparent environment.

Payroll non-compliance can also lead to employee dissatisfaction when historical corrections are applied to their net pay and to operational disruption during audits and remediation exercises.

“What starts as a ‘small’ payroll oversight can quickly become a multi-year, multimillion-rand problem,” Tosen warned.

Fuel cards, in particular, are one of the payroll items that businesses most commonly misunderstand and mismanage.

“Whether provided for business travel or as part of a broader remuneration package, the tax treatment must be clear, consistent, and defensible,” Tosen said.

She noted that the same applies to company cars, travel allowances, long-term “tax-free” subsistence allowances and employer-paid benefits.

“If there is a personal benefit element, there is likely a tax implication. Assuming otherwise – or hoping it goes unnoticed – is no longer a viable strategy,” she explained.

She said the appointment of Makhubu should be a catalyst for proactive correction, with leading organisations already doing the following to ensure they stay on the taxman’s good side:

• Conducting payroll compliance reviews
• Stress-testing their fringe benefit policies
• Aligning payroll, tax, and HR interpretations
• Investing in advisory and calculation tools

Tosen stressed that steps like these are important because the cost of fixing issues before SARS asks questions is always lower than fixing them after.

“No doubt, the era of ‘sweep it under the rug’ is over. Under stronger leadership at SARS, enforcement will sharpen, expectations will rise, and tolerance for inconsistency will shrink,” she said.

“Payroll is no longer just an administrative function, but a frontline compliance risk. And in this new environment, the question is no longer if SARS will look – it is when.”