SARS Auto-Assessment – dodge the pitfalls

In 2021, SARS trialed automatically issuing assessments for taxpayers with less complex tax affairs. This meant that you no longer had to log into eFiling and manually submit. Instead, you were given the option to “accept” a pre-generated assessment.

This year, in a bid to make the process “much easier”, SARS has fully automated the assessment. You will no longer be given the option to accept or reject. Instead, you will need to file corrections or objections after the fact – and the clock’s already ticking for doing so.

Theoretically you are meant to be able to edit the return to do corrections, but this is not possible at this time. It appears the button inside the return which should allow this does not work. At this stage we do not know how that button could affect the options below.

Correcting or objecting to a tax return, what’s the difference?

A correction is a change to your tax return. You have 40 business days (approximately two months) after your auto assessment has been issued to request a correction. However, it’s important to note that you can submit a correction just once. Thereafter, the only way to make alterations to your assessment is through an objection. This is due to the fact that the correction will trigger a verification of the return, forcing you to upload all your documents within 21 working days and then, once verification is completed, no further corrections can be done.

An objection is to report inaccuracies on the assessment. The important thing to bear in mind here is that you cannot add anything to your assessment through an objection. So, for example, if you forgot to include a retirement annuity (RA) when you submitted your correction, you cannot add that at the objection stage. That benefit will be gone with no recourse. You have 21 business days (approximately a month) after your assessment has been issued to lodge an objection.

Does Auto-Assessment negatively impact me?

If your tax affairs are simple, it might be true that this change makes your life easier. SARS will now pull data that you used to have to input from sources like employers, banks, medical schemes, and retirement annuity funds. You might be surprised to discover a tax rebate in your bank account without you having to lift a finger.

However, for many South Africans, this move denies them the opportunity to claim benefits they might have been entitled to without lodging a correction or objection. It also drastically reduces the time allowed to provide supporting documents. Previously, you had until the end of the tax season (in October) to put together all your paperwork.

Here is a non-exhaustive list of cases where you may now need to hurry to get your documents in order and submit a correction or objection before the deadline.

South African resident working overseas

You work overseas for most of the year, but you don’t pay “expat tax” as you earn under the R1.25 million threshold and the country where you’re working has a Double Taxation Agreement (DTA) with South Africa. You will need to provide proof to avoid paying tax twice on the same income.

South African seafarer

You work on a yacht or an oil rig and are usually entitled to tax relief, but you need to apply for these exemptions.

Non-resident with interest earned in South Africa

You are exempt from paying income tax on some South African-sourced interest. However, you need to prove certain requirements are met.

Living overseas and receiving a South African living annuity

If you are tax resident overseas, for example in the UK, and you receive a living annuity originating from a provident fund or pension in South Africa, you will need to submit documentation to ensure you’re taxed according to the DTA applicable to you.

Incorrect or duplicate IRP5

If your eFiling account somehow has an additional IRP5 under your name, you will need to dispute/fix this before the deadline or become liable for extra tax. If you are working abroad, you will also need to ensure that your employer used the correct code for your income so that you can claim deductions. If they have not, they will need to amend it so you can submit a correction.

See also: SARS non-resident tax status confirmation letters – your guide to confirming tax residency

You may qualify for tax benefits and refunds that SARS is unaware of

Some examples include:

• A travel logbook
• Donations to public benefit organisations
• You recently gave birth or other large medical expenses not covered by medical aid, or are claiming relief using an ITR-DD application
• RA contributions that SARS didn’t pick up automatically
• Home office expenses where you have valid grounds for the claim
• Rental losses

You now only have 40 business days from when the Auto-Assessment was issued to compile documentation and submit it as a correction. It may be possible to receive an extension of a further 21 days, but you will need to apply for that extension and show reasonable grounds.

The next steps if you've found a problem with your Auto-Assessment

First of all, we do not recommend you lodge a correction until you are absolutely sure that you have compiled all the needed documentation and identified all issues. It’s human nature to react emotionally when you spot an error, but a knee-jerk reaction in this case might cause more issues than it solves.

Rather, keep calm and start gathering your paperwork.

As you can see from this illustration, if you rush the submission of your correction, for example submitting on 15 July, you then trigger the 21 days for verification much earlier and may need to scramble to get your documentation in order.

However, if you were to use all the time available to you for submission of correction, you could have up until late September to provide verification.

Your tax practitioner will be under immense pressure at this time due to:

• Thoughtless changes of the new system
• Shorter filing season which SARS announced
• Provisional tax filing season in August 2022
• Problems with eFiling and SARS doing fixes which can cause other problems
• Missing documentation
• Needing documents from another country e.g. foreign tax residence certificates

As such we recommend you do not phone your tax practitioner but rather email them to notify them that you have been Auto-Assessed so they can see if you have an issue and then can advise you on the best way to deal with your specific issue if you have one.

Our South African tax team provides comprehensive tax services and advice for South Africans at home and abroad and anyone with South African income. Get in touch with us at taxsa@sableinternational.com