SARS auto-assessment tax warning

South Africans who have been auto-assessed by the South African Revenue Service (SARS) must still perform their own assessment, as failure to do so could lead to additional taxes or even criminal charges.

This is according to Latita Africa tax accounting specialist Kabelo Moutloatse, who said the auto-assessment process offers numerous benefits. He warned that it requires due diligence from selected taxpayers.

“The auto-assessment remains an estimated assessment. Taxpayers are advised to reconcile the assessment with their tax certificates, bank statements and salary slips, among other relevant income and expense items,” he said.

Generally, individuals selected for auto-assessments include employees with a single income and simple financial affairs. 

“Their tax disclosures have historically fit into tax certificates for medical aid and retirement fund contributions, employee tax certificates (IRP5s) or tax certificates from financial institutions if they received interest income,” Moutloatse explained.

“High-net-worth individuals or people with more sophisticated tax affairs, such as company directors and independent traders, are generally excluded from auto-assessments.”

Moutloatse outlined several things South Africans should know about SARS’ auto-assessments to avoid penalties.

Firstly, SARS will notify taxpayers via SMS or email that they have been selected for auto-assessment. The notifications will be sent from 1 July to 14 July 2024. The deadline for auto-assessed taxpayers is 21 October 2024.

However, if a taxpayer’s contact details are not updated or if the notification is sent to an unattended inbox, taxpayers will not have the opportunity to be alerted about their auto-assessment beforehand and verify its correctness. 

Therefore, Moutloatse advised taxpayers to check their e-Filing profiles during the annual Filing Season.

Secondly, it is critical to remember that SARS will assess taxpayers based on the information available to the revenue service.

“Auto-assessments may not consider all potential deductions and credits available to the taxpayer,” he explained. 

“There may also have been events during the tax year that were not captured correctly by the third-party data providers such as the employer, medical aid scheme or financial institution.”

For example, resident employees working outside South Africa are eligible for a R1.25 million exemption on their foreign income. 

However, if this is not reflected on their employees’ tax certificates, SARS will tax them on their full income.

“At the same time, if you earned other income that has not been taken into account in the auto-assessment and take no action, the resulting tax shortfall may not only result in additional tax, penalties and interest imposed by SARS further down the line but also criminal implications for the taxpayer,” he warned.

Lastly, if any taxpayer disagrees with SARS’ assessment, they must file a tax return correcting the auto-assessment on or before 21 October 2024. 

According to SARS’ website, if an auto-assessment was issued after 21 October 2024, then taxpayers must file a correction within 40 business days after the notice of assessment.

If a correction is filed after that date, the taxpayer may end up paying penalties and interest. 

“It is also important that the taxpayer provide a valid reason for the delay in submission and request condonation from SARS,” he said.

“The tax agency has the discretion to accept or reject the late submission based on the reasons provided.”

If SARS does not accept the corrected return, the taxpayer can still lodge an objection to the assessment. If this objection is denied, the taxpayer has the right to appeal the decision.

“It is unwise to knowingly accept an assessment that is not a true reflection of your tax affairs by arguing that SARS arrived there on its own,” Moutloatse cautioned. 

“While the auto-assessment process is certainly a boon by SARS to enhance the level of compliance among individual taxpayers, remember, if it goes wrong, you’re still on the hook.”

“Start with the evidence, namely your supporting documents, and work backwards from there. Do not stick your head in the sand. Take your tax matters seriously, especially when SARS files your return for you.”