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Sars, you, and those auto-assessments

It starts with ‘auto-submission’ – Sars filing your return for you – and is only a provisional assessment that you are free to disagree with.
The term 'auto-assessment' has created unnecessary anxiety since it creates the impression that the assessment has already been issued. Image: Shutterstock

This article discusses the practical considerations around the much-heralded auto-assessment, the latest offering towards easing the tax compliance burden to come from the South African Revenue Service (Sars).

Taxpayers are cautioned to take a step back, and properly check the third party data used by Sars before they accept the assessment.

‘Auto-assessment’ is a misnomer

Tax practitioner and founder of Think-Tax Gauteng, Johan Heydenrych, is of the view that the term ‘auto-assessment’ is a misnomer, and that the process is better described as the “auto-preparation of the income tax return based on third party supplied information”.

Heydenrych notes that the term ‘auto-assessment’ has unnecessarily created anxiety in many taxpayers since it creates an impression that the assessment has already been issued.

He also says that it is not a new type of tax assessment; the process is merely “designed to streamline the administrative process”.

It is basically a pre-populated return.

Accept/edit/do nothing

When a taxpayer receives a notification of an auto-assessment, they must log into their eFiling profile and check the pre-populated return. The onus is on the taxpayer to thoroughly check the return.

The options available to the taxpayer are ‘accept’, ‘edit’, or ‘do nothing.’ Before November 16.

When the taxpayer ‘accepts’ or ‘edits’ the pre-populated tax return, an ‘original assessment’ will be issued.

If the taxpayer does nothing, that is, if they fail to take action before November 16, Sars will issue an “estimated assessment” in terms of Section 95 of the Tax Administration Act (TAA). This estimated assessment will only be issued after January 29, 2021.

If the taxpayer disagrees with the assessment, they have 40 days in which to submit a ‘true and full return’, or the relevant material, and request Sars to issue a reduced or additional assessment. A senior Sars official may extend this period.

Before blindly accepting the pre-populated return …

Be aware that the third party data may be incomplete or incorrect.

It will also not include offshore income, a capital gain/loss, information to be submitted on the sale of a primary residence under the primary residence threshold, rental income, or donations made.

If this information must be provided, the taxpayer should select the ‘edit’ function.

Avoid the ‘estimated assessment’

Heydenrych says it is preferable to select the ‘accept’ or ‘edit’ functions (and provide the additional information) as this will result in an original assessment that is subject to the normal objection and appeal process under the TAA.

If the taxpayer does nothing, the ‘estimated assessment’ will be issued – and the taxpayer’s right to object and appeal against an estimated assessment has been limited by the TAA.

Remain prepared for a tax audit

Heydenrych warns that Sars may still carry out a tax audit. Where the taxpayer has failed to disclose any additional income, the three-year subscription period will most probably not apply. Further, interest and penalties will be levied.

If a taxpayer accepts an incorrect auto-assessment, how can they correct it? 

If an assessment has been ‘accepted’ and an ITA 34 issued, Heydenrych says the taxpayer can check to see if the ‘make a correction’ option is still available and, if it is, can then submit a revised assessment.

If the ‘correction’ option isn’t available, he says the taxpayer can:

  • Make use of the Voluntary Disclosure Programme (VDP) if taxes were underpaid. Understatement, late payment and underestimation penalties can be avoided but interest will remain payable.
  • Request a reduced assessment within three years from the date of assessment in terms of Section 93 of the TAA if taxes were overpaid.

If a taxpayer with other income receives notice of an auto-assessment

The taxpayer must select ‘edit’ and include the additional information.

Sars’s website deals with this as follows:

  • Question: I didn’t receive an auto-assessment SMS but see my return is available on eFiling, or should I wait for September 1?
  • Answer: You may file now, no need to wait for September 1.

The author notes that if the taxpayer owes Sars money, they have the right to only submit the tax return/complete the auto-assessment process on or before November 16, 2020.

Impact on the accounting and tax profession

Heydenrych is of the view that: “The tax practitioner and the accounting profession as a whole will need to become more involved in providing assurance that the data as communicated by third parties to Sars is complete and accurate.

“If the data provided by third parties is incorrect, then the taxpayer will experience significant difficulties in editing auto assessments and objecting against incorrect assessments. I believe that increased focus should be given to the integrity of third party data submissions by the accounting and tax profession than is currently the case.

“The increased reliance on technology will pave the way for auto assessments for certain indirect taxes such as value-added tax (Vat) and securities transfer tax.

“Automated verification of input tax and real-time payment of output tax will in my view replace ‘batch reporting’ of Vat obligations.”

He says the VAT 201 form “as we know it” will, in his view, be replaced by:

  • Real-time automated Vat payments on supplies made, and
  • Real-time automated Vat refunds on purchases made by vendors as supported by electronically verified tax invoices.

He adds: “The current auto-assessments of individuals will also pave the way for automated auditing of company income tax liabilities. The compulsory submission of annual financial statements in iXBRL format to the Companies and Intellectual Property Commission may easily be used as [a] basis to query differences in ITR 14 submissions made by companies.”

This new process should make it much easier for salary earners to file their tax returns. It should also ease the workflow and compliance checking at Sars, enabling it to concentrate on the larger income earners.

Listen to Nompu Siziba’s interview with Moneyweb contributor Amanda Visser:

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Never accept anything from SARS, ever, without triple checking it. Remember they are part of the Mafia state and part of the problem facing all South Africans.

doing tax obo clients became a nightmare overnight – the useless “auto assessments” of sars results as follows: the excited client phones and the conversation is something like – “don’t worry to do my tax – my daughter got hers – she just pressed the accept button and it was done, today i got my auto assessment and will also just accept it, at least i’m getting some money back”, I ask her: and what about your new source of income? remember the flat that you are renting out now for the the last tax year. Answer: “sars don’t need to know about it – from now I’ll do my tax myself – I’ll get of your list as a client.”

Well these type of clients are written off / lost whilst time was already spent on them – is sars willing to take this as a loss when it comes to my own tax???????

SARS with their continuously changing attitude (they call it an improvement) messed many times, but the “auto-assessments” takes the cake – it is now time that tax and accounting control bodies tell them in the face that all taxpayers are not identical in taxable income and sars tv announced / advertised “auto-assessment” is creating chaos in the real world – dream on sars

Was initially thinking myself, people that have uncomplicated SARS-returns (those without car allowances / comp cars / rental property) would end up doing their tax themselves…and a loss in clients for the tax practitioners.

NOT necessarily so. After I briefed my clients back in July via WhatsApp Broadcasts (with simplified comments, flow images) what to expect and to do….my comms are clearer than of SARS….and even after that I got numerous client responses:
“I got this SMS. What do I do now?! Please help” (sigh 😉

My solution is to meet clients halfway, by offering lower/discounted fees when there is NO NEED to do a fancy/elaborate upfront Tax Calculation-sheet, and you know the SARS result appears reasonably correct (based on glancing at supp docs you received from client). Saves plenty of time. (And you still ensure, by brief docs checking, that SARS does not do your client in).

Yes, we’ll earn less per tax client, but we’ll move faster through the mountain of workload of waiting clients, through reduced workload.

…”remember the flat that you are renting out now for the the last tax year. Answer: “sars don’t need to know about it ….”

Ja well, pillocks like these (especially the AirBnB “entrepeneurs” will be asked some awkward questions by SARS when they enrich their database with Deeds Office data…

Owning a second property does not mean you are renting it out. I don’t.

@rfjock who is losing sleep over the fact that some ‘pillocks’ may have made a little extra cash to help see them through the month.

Wow, how bitter and small minded to be jealous like this ????

I think that this auto-assessment is a great olive branch extended to the tax payer. It is far better than SARS stealing money from those least able to afford it by lying that ‘you don’t need to submit your returns’ under a certain threshold.

“The onus is on the taxpayer to thoroughly check the return.”

This sours the entire situation as once again the responsibility for correctness resides entirely with the individual tax payer. I have even heard talk of errors resulting in automatic penalties. SARS does not provide enough information to ‘thoroughly check’ anything. If this is the bar that needs to be cleared then it’s best to just reject outright and check the old fashioned way.

Oops, I guess Tax Practitioners still want to make their money, how dare SARS strike at the middleman.

I’ve used this to my advantage….it’s like new ‘AI tools’ (just give discount to clients, by cutting out a lot of the prep pre-calc work. But remember, only some, not everyone.

Their refunds still checked as correct / Clients are happy with lower fee / I can move on quicker to next client’s work to clear backlog faster.

Like in ANY industry, we use tech to to be able to serve more customers over a shorter time-span.

(…I’ve now stopped using my horse & cart for transport & converted to automobile….wow what a difference! I can get to so many more places over the same timespan & more convenient.)

It also frees up more time to help customers with more serious tax problems, caused by themselves in ignorance, or by a malicious SARS. This antagonism will never cease.

On a side note, I was expecting that the equity trader/stockbroker job would’ve disappeared by now, thanks to AI and automation. But no, my few stockbroking tax clients I have are still earning a fantastic amount of money, many times more than their own tax advisor 😉

Where the cookie hits the fan for the tax practitioner, is when the client who accepted his/her auto assessment leave the tax practitioner as a client, make self a mess of it and then wants to come back to the tax practitioner for help, who just lost income due tax wip written off – my attitude: sorry look after yourself – you believed the sars tv advertisement of “auto assessment” and “to your service” that it would be just a walk in the park.

See one must even make an appointment with sars to see them nowadays

same old story…. just a different juice!! I warn the peoples of mine….all forwarding the greatly up beat sms notices to me from them don’t get excited…. Don’t TOUCH IT… once you logon… immediately an complete different version of the calc page display… every time year on year once fire up eFiling… the user have to wrangle thru simplistic questions to certify over and over the same old story of questions… that’s why the family members come in to play… and beg…..Please Paps… help us out with these gugglable stories… SARS can rather use the ‘GAMERS’ to sit in the sandpit user environment… SAP environment to do tax test inputs… enjoy the trip!!

Are you OK chap?

I wonder if the taxi industry participants ‘unsubscribed’ from this service as well! Nice to think an industry of thugs get a self-authorized tax exemption while ordinary, law-abiding citizens get continual threats from SARS about tax compliance.

Anybody else finding that Old Mutual Unit Trust IT3 certificates are not uploaded to EFiling?

Helping somebody, not auto assessed, wanted to file early. It looks like better to wait, as trying to add provider data proved messy.

On the 2’nd of August I handled three tax returns. Number one was auto-assessed. No problem data was correct. Number two was my own submission, no problem my refund was paid a few days later. Number three was my wife and they sent audit notification. This time there was no vague letter, rather a clear instruction on what they wanted in relation to home office expenses. This was a vast improvement on previous years.

I’ll never accept any ‘auto-assessment’ for the SARS. Shocker: SARS had changed the rules for medical claims. Now it’s a percentage of income and if that percentage is lower than the percentage put forward by SARS then you cannot claim any medical. I cannot therefore claim medicine which my medical aid isn’t prepared to pay from chronic. Taxpayers are taken to the cleaners by SARS.

Christina S, you need to pose this question to “Zinger” on this forum, as according to him there’s little need for professional tax advice.

Read SARS guild to medical tax credits, whoever wrote that guide is in serious need of some medication!

Just to point out if you have not received the SMS yes, your tax return is there on file but it does not allow you to enter amounts not already on the form, for example local or international interest. All I have been able to do is check the prepopulated sections to see if they are correct. So I will have to wait for 1 st September. I responded to my daughters SMS checked and accepted, her refund was in the bank 48 hours later.

RHM : I have noticed few issues

In a category such as Domestic Income, they show the sources (Investec, Nedbank, AllanGray, etc) and the total across all but not the total per provider. There seems no way to see what Nedbank said to EFiling. My mom’s totals are close, but not exact – so hunting for R34.38 difference between her IT3’s received and IT3 data on EFiling is a bitch. SARS should have the amount per provider!

None of my mom’s Old Mutual Unit Trust actually received IT3 data is showing. Not sure whether to wait to try and see what data OM has wrong about my Mom. I tried clicking to Add but that is a mess.

Wait for Sep is probably the way to go

End of comments.

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