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

Two local experts shared that while the system is designed to make tax season simpler by using information already submitted by employers, banks, medical aid schemes and retirement fund administrators, taxpayers remain responsible for ensuring everything is accurate.

Danie Grobbelaar of Tax Specialists said an auto-assessment is SARS’s way of simplifying the tax return submission process.

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

SARS may not have the full picture

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

He used the example of someone who has always earned a salary from a single employer but started a small side business during the tax year.

“SARS may assume your income sources remained unchanged and raise an incomplete auto-assessment,” he explained.

The same can apply to:

• Freelance work
• Rental income
• Profits from selling shares, cryptocurrency or property
• Other income streams that may not automatically be reflected

Employer information can be wrong

Grobbelaar said even information submitted by employers can sometimes be incorrect 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 could also lose out if allowable deductions have been left off 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 an auto-assessment.

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

“If taxable income is omitted or additional tax becomes payable, SARS may levy penalties and interest on outstanding amounts,” he said.

The Two-Pot trap

According to Jeffrey, the introduction of the Two-Pot Retirement System has created another area where taxpayers may face unexpected outcomes.

Many people assume that because tax was deducted when they withdrew money from their retirement savings pot, their tax affairs relating to that withdrawal have been settled.

“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 overall income and the tax already deducted, they may have to pay additional tax or could qualify for a refund,” he said.

Grobbelaar explained that a taxpayer earning a salary may withdraw money from their retirement savings pot and assume the tax deducted by the fund is sufficient. However, if they also earn freelance income or rental income that was not considered when the deduction was calculated, they may find themselves owing SARS additional money when their final assessment is completed.

“SARS could assume you only receive your salary, putting you in the 36% income tax bracket, for example, but your additional income actually pushes you into the 45% income tax bracket. This can cause a significant discrepancy between your income tax paid on your savings component withdrawal and that which should have been paid to SARS.”

Jeffery added that another common misconception is that the amount received from a Two-Pot withdrawal is “extra money”.

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

“My advice is to think carefully before withdrawing from your retirement savings. While the Two-Pot System provides access to funds during financial hardship, withdrawals should be reserved for genuine emergencies and not discretionary spending. Every withdrawal not only reduces your retirement capital but may also increase your tax liability.”

Check before you accept

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

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

“If you are unsure, consult a registered tax practitioner who can review your assessment and ensure it is accurate before you accept it,” said Jeffrey.