Incorrect source codes by financial institutions prevent tax return processing, resulting in unjust penalties for taxpayers, raising concerns about systemic issues.
Withdrawing money from a pension fund should be a straightforward, regulated process. Yet for some people, what starts out as a legitimate financial transaction can turn into months of tax penalties. The question is whether this is an isolated administrative failure or whether other South Africans are quietly finding themselves trapped in the fines machinery of the SA Revenue Service (SARS) due to reporting errors.
When withdrawal becomes a liability
In 2023, I withdrew money from a pension fund managed by Discovery. The return itself was uneventful. The problem arose when Discovery submitted the wrong “source code” to SARS – the classification that tells the tax authority what type of income is being reported.
Due to this misclassification, SARS has not been able to process my ITR12 tax return. Instead, the system treated me as if I had failed to deposit, and issued monthly penalties for non-deposits. Each fine comes automatically, regardless of the fact that the error is not from me but in the reporting chain between the pension fund and SARS.
Discovery has repeatedly assured me that the issue is being rectified. Even after months nothing has changed. My broker, who facilitated the withdrawal, has attempted to intervene. On call…