Polokwane tax experts warn not to blindly accept SARS auto-assessment

Polokwane – As SARS rolls out auto-assessment for millions of taxpayers, tax experts are warning South Africans not to assume that calculations are automatically correct.

Two local experts shared that although the system is designed to simplify tax season by using information already submitted by employers, banks, medical aid plans and retirement fund administrators, taxpayers are responsible for making sure everything is accurate.

Danny Grobbelaar of Tax Specialists said auto-assessment is SARS' way of simplifying the process of submitting tax returns.

“However, taxpayers are responsible for declaring all their income and ensuring that SARS receives the correct amount of tax, even if mistakes are made by third parties or SARS itself,” he said.

There may not be a complete picture of SARS

According to Grobbelaar, one of the biggest risks is that SARS may not have a complete picture of a taxpayer's finances.

He gave the example of a person who has always earned a salary from the same employer but has started a small additional business during the tax year.

“SARS may assume that your income sources remain unchanged and may perform an incomplete auto-assessment,” he explained.

The same may apply to:

• freelance work
• rental income
• Profit from selling shares, cryptocurrencies or assets
• Other income sources that may not be reflected automatically

Employer information may be incorrect

Grobbelaar said the information presented by employers can also sometimes be inaccurate or incomplete.

“For example, an employer may accidentally omit overtime payments when submitting information to SARS. The employee received the money, but it may not appear on the tax return.”

Taxpayers may also suffer losses if allowable deductions are omitted from the assessment. Medical expenses paid out of pocket, home office expenses and business travel claims often require additional information from taxpayers and may not automatically appear on the auto-assessment.

Craig Jeffrey, director of The Tax Shop Polokwane West, said taxpayers should remember that accepting an incorrect assessment does not absolve them of their responsibility.

“If taxable income is missed or additional tax becomes due, SARS can impose penalties and interest on the outstanding amount,” he said.

two-pot trap

According to Jeffrey, the introduction of the two-pot retirement system has created another area where taxpayers may face unexpected consequences.

Many people assume that because taxes were deducted when they withdrew money from their retirement savings account, their tax issues related to that withdrawal are resolved.

“In reality, the withdrawal is added to their other taxable income for the year, such as their salary, pension, interest and other taxable income. SARS then calculates tax on the combined total. Depending on the taxpayer's total income and the tax already deducted, they may have to pay additional tax or qualify for a refund,” he said.

Grobbelaar explained that a salary-earning taxpayer may withdraw money from his or her retirement savings account and assume that the taxes deducted by the fund are sufficient. However, if they also earn freelance income or rental income that was not considered when calculating the deduction, they may have to pay additional money to SARS when their final assessment is completed.

For example, “SARS may assume you only receive your salary, which puts you in the 36% income tax bracket, but your additional income actually pushes you into the 45% income tax bracket. This can lead to a significant discrepancy between the income tax paid on your savings component withdrawals and the income tax paid to SARS.”

Jeffery said another common misconception is that the amount received from a two-pot withdrawal is “extra money.”

The truth is that withdrawals increase taxable income for the year and also reduce retirement savings available at retirement, which can have a significant long-term financial impact, he said.

“My advice is to think carefully before making withdrawals from your retirement savings. While the two-pot system provides access to funds during financial hardship, withdrawals should be reserved for true emergencies and not discretionary spending. Each withdrawal not only reduces your retirement capital but can also increase your tax liability.”

check before accepting

Both experts urged taxpayers to review their auto-assessments carefully before accepting them.

A few minutes spent checking whether all income, deductions and supporting information are correctly reflected can prevent unexpected tax bills, penalties or missed refunds later.

“If you're unsure, consult a registered tax practitioner who can review your assessment and make sure it is accurate before accepting it,” Jeffrey said.