Sars auto-assessments: What you need to know

With the announcements of Sars’ 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,” Kabelo Moutloatse, tax accounting specialist at Latita Africa, says.

He says individuals who are generally 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.

ALSO READ: Sars auto-assessments: ‘Do not just accept’ – expert

Cedric Naicker, tax supervisor at Legal&Tax, reminds taxpayers that your employer must issue an IRP5 at the end of every tax year, and you must ensure that you get it.

Sars receives data from employers, medical schemes, banks, retirement annuity funds and other institutions and use it to calculate your tax assessment.

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 says.

Your auto-assessment will start with a notification

Sars will send an SMS or email informing you that you 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, Moutloatse says, if your contact details are not updated or if the notification is sent to an unattended inbox, you will not get the opportunity to be alerted about your auto-assessment beforehand to verify the correctness of the assessment.

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

How to manage your auto-assessment

Naicker reminds taxpayers that your employer must issue an IRP5 at the end of every tax year, and you must ensure that you get it.

You must pay income tax if you earn more than R95 750 per year and if you earn less, you must not pay PAYE.

Sars receives data from employers, medical schemes, banks, retirement annuity funds and other institutions and use it to calculate your tax assessment.

When you receive your auto-assessment, log onto eFiling or the Sars MobiApp and view your assessment.

READ MORE: Got a threatening text from Sars? Here’s what to do

You will be able to see all the data Sars used to calculate your assessment. If you agree with the data, check if a refund is due to you or if you owe Sars money.

If a refund is due to you, there is nothing more you have to do except wait for the refund, which you can expect within 72 hours, provided your banking details with Sars are correct.

Should you owe Sars, make the payment via eFiling or SARS MobiApp and EFT before the payment due date.

The payment due date is displayed on the Notice of Assessment.

Naicker says it is important to understand that filing a return after the due date of 21 October 2024 will attract penalties. Filing on time will ensure you are compliant.

Important documents

An ITA34 is a summary of your assessment for the tax year, and it is issued after submitting your tax return.

The minus symbol in front of the calculated result indicates an amount refundable to you.

When your refund amount changes to zero, generally it means your refund is being processed.

The IRP5 or IT3(a) is a certificate that shows the total income the taxpayer received, deductions and the tax that was withheld for the year of assessment.

Sars imposes an administrative penalty for non-submission of your tax return, and this causes your status to be non-compliant, Naicker warns.

What you can claim

Your private Retirement Annuity contributions are tax-deductible to decrease your taxable income. If you owe Sars a lawfully incurred debt, you can make a payment arrangement with them.

There are expenses you can claim as an independent contractor to decrease your taxable income. You can also claim a deduction if you paid for family members medical aid who is financially dependent on you.

What about the accuracy of the auto-assessments?

Moutloatse says It is critical to remember that Sars will assess taxpayers based on the information available to Sars.

“Auto-assessments may not consider all potential deductions and credits available to you.

“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 give.”

READ MORE: Sars tax season: Five scams to look out for

For example, he says, 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 certificate, Sars will tax them on their full income.

“At the same time, if you earned other income that has not been considered 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.”

Other income to declare

If you rent out a property (generally residential accommodation) and receive rental income, the amount you receive will be subject to income tax.

The rental income you receive should be added to any other income you may have, but will also be reduced by certain allowable expenses incurred.

Selling an asset at a profit will cause a Capital Gain. The profit is added to your normal income and is taxed.

ALSO READ: How to stay out of Sars’ crosshairs

This is called CGT, Capital Gains Tax. A notice of objection (NOO) can be lodged against your assessment if you have valid grounds to so do.

Naicker says it is important to always be truthful in your declaration to avoid a hefty penalty or legal action against you by Sars.

Sars can recover the money you owe them through a Debt Collection process or Garnishee or directly from your bank account.

Making corrections

If you disagree with Sars’ assessment, you must file a tax return correcting the auto-assessment. However, this must be done on or before 21 October 2024.

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

Moutloatse says if a correction is filed after that date, you may end up paying penalties and interest.

“It is also critical that you 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 Sars does not accept the corrected return, you can still lodge an objection to the assessment. If the objection is denied, you are entitled to appeal the decision.

READ MORE: There’s nothing to fear about a Sars audit

“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, remember, if it goes wrong, you are still on the hook.”

Moutloatse advice is to 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.

How to reverse an admin penalty

A remission (RFR) can be filed to request SARS to reverse your admin penalties.

The decision is still upon SARS to allow, partially allow or disallow the remission.

A taxpayer is entitled to lodge a notice of appeal (NOA) against the outcome of an objection.

NOW READ: ‘Sars could attach your assets’ – expert warns owing taxpayers