KABELO MOUTLOATSE: Mastering Sars auto-assessments

With the SA Revenue Service (Sars) having announced the parameters of the auto-assessment for this year, there has been a flood of headlines with substantially the same message: this process offers numerous benefits, but it also requires due diligence from taxpayers who are selected.

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.

Individuals who are generally selected for auto-assessments include employees with a single income, and simple financial affairs. Their tax disclosures have historically fitted 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.

High-net worth individuals or people with more sophisticated tax affairs, such as company directors and independent traders, are generally excluded from auto-assessments. Here is what you really need to know:

Notifications

Sars will send an SMS or email informing the taxpayer that they have been selected for auto-assessment. The notifications will be sent from July 1-14. The deadline for auto-assessed taxpayers is October 21. However, if contact details are not updated or if the notification is sent to an unattended inbox, taxpayers will not get the opportunity to be alerted about their auto-assessment beforehand to verify the correctness of the assessment. For this reason, taxpayers are advised to check their e-filing profiles during the annual filing season.

Accuracy 

It is critical to remember that Sars will assess taxpayers based on the information available to it. Auto-assessments may not consider all potential deductions and credits available to the taxpayer. There may also have been events during the tax year that were not captured correctly by third-party data providers such as the employer, medical aid scheme or financial institution. For example, resident employees working outside SA are eligible for a R1.25m exemption on their foreign income. However, if this is not reflected on their employees’ tax certificate, 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.

Corrections

If any taxpayer disagrees with Sars’ assessment, they must file a tax return correcting the auto-assessment. However, this must be done on or before October 21. According to Sars’ website, if an auto-assessment is issued after October 21 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. The tax agency has the discretion to accept or reject the late submission based on the reasons provided. If the corrected return is not accepted by Sars, the taxpayer can still lodge an objection to the assessment. And if the 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. While the auto-assessment process is certainly a boon by Sars to enhance the level of compliance among individual taxpayers, 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.

• Moutloatse is tax accounting specialist at Latita Africa.