SARS Auto-Assessment Tax Warning

SARS Auto-Assessment

Introduction

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

Importance of Personal Assessment

Expert Advice

According to Latita Africa tax accounting specialist Kabelo Moutloatse, the auto-assessment process offers numerous benefits but requires due diligence from selected taxpayers.

“The auto-assessment remains an estimated assessment. He advised taxpayers to reconcile the assessment with their tax certificates, bank statements, salary slips, and other relevant income and expense items.

Who is Selected for Auto-Assessment?

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.”

Key Points to Remember

Notification and Deadlines

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.

If taxpayers do not update their contact details or if they receive the notification in an unattended inbox, they will miss the alert about their auto-assessment and cannot verify its correctness. Moutloatse advised taxpayers to check their e-Filing profiles during the annual Filing Season.

Assessment Based on Available Information

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,” Moutloatse explained.

“Third-party data providers such as the employer, medical aid scheme, or financial institution may not have correctly captured some events during the tax year.”

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 the auto-assessment did not take into account and you take no action, the resulting tax shortfall may lead to additional tax, penalties, interest imposed by SARS, and even criminal implications,” Moutloatse warned.

Correcting Errors

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 SARS issues an auto-assessment after 21 October 2024, taxpayers must file a correction within 40 business days after the notice of assessment. If the taxpayer files a correction after that date, they 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,” Moutloatse 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.

Conclusion

“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.”

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