SARS is coming after businesses making these mistakes

SARS is cracking down on employers who misuse tax-free benefits, and experts warn that non-compliance, even if unintentional, can trigger audits, penalties, and backdated liabilities.

Tax Consulting SA’s tax and remuneration specialist, Tanya Tosen, said that the South African Revenue Service (SARS) is under increasing pressure to collect every cent it can to shore up the local fiscus.

South Africa’s tax base is shrinking. Only 978,140 South Africans, or 1.5% of the population, pay 60.9% of all personal income tax, the government’s biggest revenue generator.

Even more concerning is that only 235,542 South Africans, or 0.4% of the population, pay 33% of all personal income tax.

When it comes to corporate taxes, the number is even more dismal. Statistics released by the National Treasury and SARS in December 2024 revealed that only 1,051 companies pay 72.3% of all company income tax in the country.

The report reviewed tax-revenue collection and tax-return information for the 2020 to 2024 tax years and the 2019/20 to 2023/24 fiscal years.

Put differently, the results mean that companies with taxable income greater than R100 million constituted 0.1% of the total number but contributed 72.2% of taxable income and 72.3% of assessed tax.

However, while South Africa’s tax base may be declining, the taxman’s capacity is growing.

SARS received a R3.5 billion injection in the 2025/26 Budget, which, paired with the launch of Project AmaBillions, will enhance the taxman’s revenue collection efforts.

The National Treasury had hoped to plug the country’s budget shortage with a two percentage point VAT hike, which was later adjusted to a one percentage point hike spread across two years.

However, with that VAT hike now off the table altogether, the country faces a R75 billion budget deficit. This means that SARS is under more pressure than ever to collect taxes and clamp down on non-compliance.

Fuel cards and subsistence allowances

Tosen said that although many compliant businesses play by the rules, it is becoming clear that some large corporations are pushing the envelope too far, sometimes unintentionally, but often with their eyes wide open.

“Whether driven by cost-saving efforts, legacy practices, or poor advice, some employers are taking liberties that will not withstand the scrutiny of a SARS audit,” Tosen explained.

“With SARS’ improved data matching, AI-powered risk profiling, and growing appetite for corporate audits, it is no longer a question of if, but when they come knocking.”

According to Tosen, Tax Consulting SA has recently observed several recurring compliance missteps employers make, sometimes unknowingly.

Worryingly, SARS is intensifying its focus on the very areas where companies tend to make tax mistakes. If not handled correctly, these mistakes can represent a significant risk to employers.

One of these common mistakes, Tosen explained, relates to fuel cards. “Fuel cards remain a widely used employee benefit, either as a standalone offering or alongside a travel allowance,” she said.

“However, where these cards cover any personal use, like fuel, maintenance, tyres, or services for an employee’s privately owned vehicle, the full value or portion relating to personal use must be taxed via payroll as a fringe benefit.”

Too often, Tosen said, this requirement is overlooked or intentionally ignored, exposing the company to backdated PAYE liabilities, penalties, and interest upon audit.

Subsistence allowances are another avenue where employers commonly make tax errors. These allowances are intended to reimburse modest, short-term expenses incurred while employees are away on legitimate business travel.

“When used correctly and within SARS-determined thresholds, these can be non-taxable.”However, she said that they continuously see abuse, where:

• All travel-related expenses, such as meals and accommodation, are already covered by the employer, and
• A tax-free allowance is still paid, or
• Allowances are paid over extended, recurring periods, clearly outside the scope of what SARS deems reasonable.

“This practice raises red flags and increases audit risk, with SARS viewing it as an attempt to sidestep legitimate taxation,” she warned.

Company cars and travel allowances

When an employee is allocated a company vehicle, tax-related errors are also common, Tosen explained.

The appropriate fringe benefit must be taxed monthly via payroll, especially where the vehicle is assigned for exclusive or frequent use, and there is any degree of personal use, including home-to-office travel.

“Incorrect or inconsistent treatment, or total omission of the benefit, is a common audit trigger and can lead to a sizeable SARS reassessment,” Tosen warned.

Finally, she stressed that SARS no longer allows generic travel allowances based on job grade or seniority. Employers must be able to demonstrate that:

• The allowance is based on actual, expected business travel by the employee on a monthly basis
• There is a clear condition of employment requiring the use of the employee’s private vehicle for business purposes
• A SARS-compliant logbook is maintained to substantiate the deduction

“Travel allowances that are fixed arbitrarily without substantiated mileage data or business justification pose a high risk of being disallowed and reclassified as fully taxable remuneration,” she warned.

“Employers should have a properly designed travel allowance tool with a declaration to support this action on payroll.”

According to Tosen, many employers mistakenly believe that if they have gotten away with non-compliance for a few years, the risk is behind them. “This could not be further from the truth.”

“Tax defaults do not prescribe. SARS has the authority to reassess historical years without time limits in cases of suspected fraud, misrepresentation, or non-disclosure.”

She stressed that the “invisible benefit” may come back to haunt companies with interest, penalties, and reputational damage.

“If you have identified or even suspect historical non-compliance in your payroll or benefits structures, the Voluntary Disclosure Programme (VDP) offers a lifeline.” Through this process, companies can:

• Make a clean and structured disclosure to SARS
• Potentially have penalties remitted or reduced
• Resolve historical exposure under a single tax type for all impacted years
• It is important to note that once SARS has initiated an audit or contacted you about the issue, VDP is no longer an option. Time is critical, and proactive disclosure is your only shield

“Turning a blind eye or hoping SARS will not notice is a high-risk strategy that may inevitably backfire,” she said.

“It is time to tighten the ship. The cost of inaction is simply too high. When SARS arrives, you want to be ready, not scrambling.”