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Everything you should know about tax auto assessment

In 2019, the South African Revenue Service (SARS) launched a system, which was dubbed an “auto assessment”, to assist taxpayers with their annual tax returns. But what does this system entail, and how will it impact you?

17 September 2020 · Isabelle Coetzee

Everything you should know about tax auto assessment

In 2019, the South African Revenue Service (SARS) launched a system, which was dubbed an “auto assessment”, to assist taxpayers with their annual tax returns.

But what does this system entail, and how will it impact you? We got in touch with local tax experts to answer these questions and more.

Tip: Have you tried out our income tax calculator? Give it a shot today.

What’s a tax auto assessment?

According to Nadine Chetty, co-founder at Ecomm Accounting Solutions, a tax auto assessment is an assessment from SARS that is based on third party information, such as your IRP5, medical aid certificate, retirement annuity certificate, and any investment income that you receive.

“SARS will assess whether you owe them or they owe you. For basic income earners, it's a quick and easy way of filing your taxes without the stress of going into a SARS branch,” says Chetty.

Craig Turton, vice president of business development at Purple Group Limited, says that you should receive an SMS from SARS to say that you have been selected for an auto assessment.

“This process was started in 2019. However, it’s been expanded this year in response to the Covid-19 pandemic and the need for physical distancing. It’s intended to remove the need for taxpayers to travel to branches to file returns there,” says Turton.

READ MORE: The newbies' quick guide to tax season

You can reject the auto assessment

Turton explains that all taxpayers, where third-party details have been submitted on their behalf, will qualify for an auto assessment. However, he warns that the assessment could be inaccurate for a few reasons.

“SARS may not have all your tax certificates, and documents may be out of date which could mean you miss out on a refund,” says Turton.

Therefore, he recommends rejecting the auto assessment and rather completing your tax return yourself or making use of a company like TaxTim to assist you. Have a look at this article to find out how you can reject the auto assessment.

Who will be targeted?

Taritha Oosthuizen, senior tax consultant at Tax Consulting South Africa, believes that taxpayers with relatively straightforward tax returns will be targeted.

“Where a taxpayer has additional income or deduction information to declare, which is not available to third parties, it is expected that SARS will not select the taxpayer for auto assessment,” says Oosthuizen.

She explains that because the effectiveness of the auto assessments relies on third-party data, SARS will not be able to include or consider data that is not available to third parties. For example, the information from a taxpayer’s travel logbook, which is used to compute a claim against a travel allowance or a company car fringe benefit, or trade income, such as rental income, will not be included.

“A taxpayer will be expected to manually add this information to their tax returns should they be selected for auto assessment, and failure to do so might be seen as a deliberate attempt to evade the taxman,” says Oosthuizen.

What if the auto assessment is wrong?

Oosthuizen points out that in some cases, they have seen that some third-party data, which has been pre-populated into taxpayers’ returns, is not correct.

“A taxpayer who finds themselves in this scenario will have no choice but to wait for the second phase of the 2020 tax season to amend and submit their 2020 tax return. This phase kicks off on 1 September 2020,” says Oosthuizen.

However, she adds that the auto assessment shouldn’t cause panic or concern among taxpayers. They should merely see the implementation of this system as a helping hand.  

How successful is this system?

“In our experience thus far, it appears that the success of auto assessments is a mixed bag. Where SARS selects a taxpayer whose submissions are relatively straightforward, the auto assessment makes their compliance process relatively easy,” says Oosthuizen.

However, she says that where SARS selects a taxpayer who needs to declare additional income or deduction information, their submission process is more complicated.  

“Regardless of the kind of submission, we note that it remains the taxpayer’s responsibility to ensure that information declared is accurate and correct. It’s important that each taxpayer reviews their tax returns before accepting the SARS auto assessment,” says Oosthuizen.

Want to know more about your taxes? Have a look at this page for more information.

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