By Willem Oberholzer
The South African Revenue Service (SARS) auto-assessment is coming with a new twist this tax season.
Hold your horses, you say, what is an auto-assessment to begin with?
Conventionally, every tax year taxpayers must submit a return to SARS. Upon submission you receive an assessment from SARS in which SARS either indicates your tax liability (or refund) as declared, or requests you to submit supporting documentation in order for SARS to verify the declarations and confirm or alter the tax liability (or refund) declared.
The SARS auto-assessment is the reverse of the conventional method and was introduced as an expansion to the mandate of social distancing during the Covid-19 pandemic, as it aimed to reduce contact appointments at SARS’s branches.
With an auto-assessment, SARS issues you with an assessment for the tax year indicating your tax liability or refund without you having submitted a tax return to SARS.
How does this work exactly?
SARS has access to information you would normally use to complete your tax return, such as information from employers (for example, IRP5s indicating all the cash and non-cash benefits provided to you as an employee and the amount of tax withheld on the benefits by your employer); information from financial institutions, medical schemes, retirement annuity fund administrators and other third-party data providers.
Previously upon issuance of an auto-assessment, you would be given the option to either accept or edit the estimated assessment. If you agreed with all the income and deductions raised, and the subsequent tax debt or refund on the auto assessment, “accepting” the return would mean that you would not be obligated to submit another tax return to SARS for the tax year. However, if you did not agree with the auto-assessment, opting to “edit” the return meant that you would have to file your return via eFiling or the SARS MobiApp.
In contrast, this tax season, you will only have the option to decline the assessment. There will be no need to accept the assessment, as it will be considered an original assessment as opposed to an estimated assessment.
A further added twist is that you have only 40 business days from the date the assessment is issued to decline the assessment. However, you may request an extension to decline the assessment, limited to a further 40 business days. SARS will grant the extension if you can prove exceptional or reasonable circumstances hindered you from timeously declining the assessment. Exceptional circumstances are stipulated in Section 218 of the Tax Administration Act, 28 of 2011 as:
- A natural or human-made disaster;
- A civil disturbance or disruption in services;
- A serious illness or accident;
- Serious emotional or mental distress;
- Certain acts by SARS;
- Serious financial hardship;
- Any other circumstance of analogous seriousness.
An original assessment means if you do not decline the assessment, the assessment will be final, and the tax debt reflected on the assessment will be payable by the end of January 2023. If you become aware of an aggrievance within the assessment after the 40 business days to decline the assessment have lapsed, your only avenue of relief would be to lodge an objection against the assessment. An objection will involve submitting a dispute form on eFiling and relevant facts and supporting documents to substantiate the relief sought.
The auto-assessment will not be issued to everyone, neither will it be issued to companies or trusts. The auto-assessment will be issued to individuals selected by SARS, and this selection will not be an indication of prejudice or preferential treatment. The selection is likely based on the individuals SARS can more accurately assess, such as employees with one income stream or individuals who are not independent contractors.
In terms of timing and process, from July 1 to 4 July, SARS aims to issue all auto assessments where a refund is due. The rest will be issued in batches up to July 24.
For people who do not receive an auto-assessment and those who decline the auto-assessments, tax returns must be submitted to SARS in the customary manner of completing an Income Tax Return (ITR12).
Deadlines
The deadlines for the submission of the ITR12 returns for the 2022 tax year are:
- July 1 – 24 October 2022:
- July 1 – January 23, 2023:
Willem Oberholzer is director, corporate tax, at Probity Advisory.