Tax return deadline looms with penalties for those who miss it

If you are one of more than 920 000 taxpayers who still need to file a tax return within the next few days, be sure to do so to avoid incurring penalties for failing to submit.

The deadline for individual tax returns is Monday 23 October, unless you are a provisional taxpayer.

If you fail to make the deadline, you are most likely to incur ongoing monthly penalties, starting from R250 a month, for as long as your returns remain outstanding.

The South African Revenue Service (SARS) imposed penalties for outstanding returns for the 2021 and 2022 tax years on 2.25 million taxpayers. These penalties amounted to R4.26 billion collectively. Read more: Do I need to file a return?

The October 23 deadline also applies if you received an auto-assessment and need to correct the information on which SARS based that assessment.

According to a spokesperson for SARS, more than five million taxpayers have either filed returns or been auto-assessed, but another 928 000, excluding provisional taxpayers, still need to do so. SARS's digital platforms are well-prepared for the last-minute filing rush, the tax authority's spokesperson says.

Provisional taxpayers have until 24 January 2024 to file income tax returns for the tax year to February 28 2023. Read more: Should I be registered for and paying provisional tax?

Monitoring accounts

Don’t think you can fly below the radar if you are not registered for tax. Since October last year, SARS has been registering taxpayers for income tax if third party data indicates that they are receiving income that could be taxable. 

The SARS spokesperson says 212 220 individual income taxpayers have been registered via the auto-registration process since then.

If SARS auto-registers you, you will be sent an SMS and a letter “welcoming” you as a registered taxpayer and informing you what your obligations are.

At the recent South African Institute of Tax Practitioners Tax Indaba, SARS deputy commissioner Johnstone Makhubu said the tax authority had found 2 080 South Africans each with more than R10 million flowing through their bank accounts that had not been declared to SARS.  

Court upholds tax raised
In July this year, the High Court heard a case in which SARS had challenged a taxpayer because the income they had declared on their tax return did not match the amounts declared to SARS by third parties between 2007 and 2010, André Daniels, head of Tax Controversy & Dispute Resolution at Tax Consulting SA, says.

Two banks and a foreign exchange provider had reported that the taxpayer had received around R4.5 million that the taxpayer had not declared to SARS. The revenue service charged interest and penalties on the undeclared amounts, Daniels says.

In the subsequent court case, CSARS v M (A5036/2023) [2023], the High Court ruled that SARS was correct in raising the taxes, not because the revenue authority had proved that its assessment was correct, but because the taxpayer could not discharge the legal burden of proof, Daniels says.

There is certainly nothing untoward about receiving amounts in your bank account, however, you must keep in mind that you have the duty of discharging the burden of proof that an amount is taxable or non-taxable, Daniels says. 

Data used in returns
SARS receives data about your income, capital gains and tax deductions from employers, medical schemes, banks, retirement annuity funds, and other institutions. It also receives information from estate agents and car dealerships, Daniels says.

The authority uses this to detect those who are not filing returns, to check the taxable income and gains of those who do file returns and to auto-assess the taxes of those whose affairs are relatively simple.

If you have been auto-assessed you should have been notified via SMS or email, but if your contact details with SARS are not up to date, you should check if you have been auto-assessed on the SARS site here.

Penalties are the stick

While auto-registration and auto-assessments are primarily aimed at making it easier to comply with your duty to file a return, penalties are designed to make it painful if you do not comply with your tax obligations.

The penalties imposed to date have resulted in 1.13 million payments to the value of R1.35 billion being made to SARS and 505 249 of the outstanding returns for previous tax years were submitted as a result of penalties levied, the SARS spokesperson says.

The penalties SARS can impose were ramped up from December last year when the Tax Administration Act was amended making it possible for SARS to penalise taxpayers for having just one return outstanding. Read more: Hundreds of thousands of taxpayers hit with penalties for outstanding returns

Getting help

If you are struggling to complete your return you can use the Help-You-eFile service that SARS offers.

The SARS spokesperson says 121 286 taxpayers have made use of the Help-You-eFile option to register for income tax since the start of the 2023 tax filing season.

If you are missing documents, such as your IRP5 from your employer, tax certificates showing investment income or capital gains or your retirement annuity or medical scheme certificate, that you need in order to complete your tax return, don’t delay requesting these from your employer, financial institution or medical scheme. You can request tax certificates on many financial institutions’ websites or apps.

You can also now view tax certificates filed with SARS by these entities on the eFiling website using the “Third party data certificate search” function.

If your tax certificate has not been filed with SARS, you can enter your own data using your payslips or bank account details but remember to keep all the relevant documents as SARS may ask for proof.

Daniels says it is scary that taxpayers may have to remember transactions dating back to over 15 years. The key is to always retain exceptional records, even where the five-year record-keeping requirement has passed, he says. 

If you have previously failed to disclose income or capital gains, you can regularise your tax affairs through the Voluntary Disclosure Programme (VDP) and pay the tax that is due, but avoid the penalties that would ordinarily be imposed, he says. Read more: Who can help me with tax advice?