Individual taxpayers: Automatic SARS income tax assessments

Over the years, the South African Revenue Service (SARS) has made steady progress on gathering data from third parties.  Medical aids, retirement annuities, public benefit organisations and financial institutions all provide SARS with their income tax data.  

In the past , South African data has been pre-populated on income tax returns as well as automatic (auto) income tax assessments issued.  We expect that it will not be long before SARS is able to pre-populate foreign sourced information onto the taxpayer’s income tax return and/or auto assessment as well – an example of this would be foreign interest, dividends, and capital gains. 

Given that SARS already has a vast amount of data from third parties, the revenue authority is able to generate an automatic income tax assessment that is based on the taxpayer’s history with SARS as well as the current data that is available to them. 

The automation of income tax assessment has reduced the number of personal income tax returns that need to be submitted to, and assessed by, SARS on an annual basis.  This has had the effect of streamlining SARS’ processes as well as reduced the burden on taxpayers to submit basic income tax returns. 

Although the taxpayer does not have to “accept” the automated assessment so as to make it final, SARS does expect the taxpayer to review the assessment and make any changes necessary.  For example, let’s say an individual earns rental income and interest from a local source and SARS has only included the local interest on the auto assessment, it’s the taxpayer’s responsibility to file their annual income tax return to include the rental income as well. 

We expect that for the 2024 income tax year of assessment (1 March 2023 – 29 February 2024) SARS will again be automatically assessing as many taxpayers as possible. It’s important for taxpayers to act when they receive a notification from SARS noting that they have been auto assessed. Taxpayers are likely to have until the 2024 tax filing date (still to be determined) to make any corrections to the auto assessment.   

Should an auto assessment be issued to a taxpayer after the tax filing date, we expect that they will have 40 days to file a corrected income tax return if the individual disagrees with the auto assessment. 

In conclusion, auto assessments will increasingly become a reality that taxpayers will have to contend with, especially taking into consideration the tax revenue authority’s push towards digitisation. As such, taxpayers should not only take note of the benefits of SARS’ digital evolution, but also check that their assessments accurately reflect their tax affairs.