SARS Auto Assessment: Should You Accept It?

Receiving an email or SMS from SARS informing you that your tax assessment is complete can be a relief for many. However, for a growing number of South African taxpayers, this notification now often refers to an “auto assessment”. But what exactly is a SARS auto assessment, and more importantly, should you simply accept it?

As your trusted financial partners at My Accountant, we understand that navigating the complexities of tax season can be daunting. This comprehensive guide will explain everything you need to know about SARS auto assessments, empowering you to make informed decisions about your tax compliance.

What is a SARS Auto Assessment?

A SARS auto assessment is a preliminary tax assessment issued by the South African Revenue Service (SARS) to certain taxpayers without them needing to manually file a tax return. SARS uses data it receives from various third-party sources, such as employers (IRP5s), banks (IT3(b)s), medical schemes (IT3(m)s), and investment houses, to pre-populate and then generate an assessment.

The aim is to streamline the tax process for taxpayers whose financial affairs are relatively straightforward. If SARS determines, based on the data it has, that you owe tax or are due a refund, it will issue an auto assessment with a proposed tax liability or refund amount.

Why Does SARS Auto Assess Taxpayers?

SARS introduced auto assessments to enhance efficiency and improve compliance across the tax system. Here are the primary reasons:

• Data-Driven Efficiency: By leveraging data already submitted by third parties, SARS can quickly process a large volume of tax returns.
• Streamlining Compliance: It aims to make tax compliance easier for taxpayers who might otherwise struggle with filing their own returns.
• Reducing Workload: For SARS, it reduces the manual workload associated with processing millions of individual tax returns.

While this initiative is designed for convenience, it places a significant responsibility on the taxpayer to verify the accuracy of the assessment.

How Do I Know If I've Been Auto Assessed?

SARS typically notifies taxpayers of an auto assessment via SMS or email. These notifications will usually direct you to log in to your SARS eFiling profile or the SARS MobiApp to view your assessment. It's crucial to always verify such communications directly on the SARS platforms to avoid phishing scams.

Understanding Your SARS Auto Assessment: Key Sections

Once you access your auto assessment, you'll see a summary of SARS's calculations. Pay close attention to the following sections:

• Income Details: Verify all sources of income (salary, commission, interest, etc.) are correctly listed and match your IRP5 and IT3(b) certificates.
• Deductions and Allowances: Check that all your eligible deductions, such as contributions to a retirement annuity, medical aid contributions (and associated tax credits), and any other permissible expenses, have been included.
• Tax Due/Refund: This will show whether you owe SARS money or if SARS owes you a refund.

Remember, the auto assessment is based solely on the data SARS has received. It might not include all your eligible deductions or reflect certain life changes that could impact your tax liability.

Should You Accept Your SARS Auto Assessment? The Critical Decision

This is the million-dollar question. The simple answer is: not without a thorough review. While SARS aims for accuracy, their auto assessment is only as good as the data they receive. Your financial situation might be more nuanced than what their data capture reveals.

You have a 40-business-day window from the date of the auto assessment to either accept it or request an edit/file a dispute.

What Happens If You Accept Your Auto Assessment?

If you take no action within 40 business days, or if you explicitly click 'accept' on eFiling, the auto assessment becomes final. This means:

• If you owe tax, you will be liable for that amount, and failure to pay could result in penalties and interest.
• If you are due a refund, SARS will process it to your nominated bank account.

Warning: Accepting an incorrect auto assessment, especially one that underestimates your deductions, means you could be paying more tax than legally required. Conversely, if it understates your income and you accept it, you could face penalties later if SARS discovers the discrepancy during an audit.

What Happens If You Don't Accept? Objecting to an Auto Assessment

If, after careful review, you find discrepancies or believe the auto assessment is incorrect, you should not accept it. Instead, you have two primary options:

1. Request an Edit: If you believe SARS has omitted some information (e.g., a missing IRP5 or IT3(b)), you can request an edit. This allows you to submit the missing documents or rectify minor errors.
2. File a Dispute (Notice of Objection - ADJ): If you disagree with the assessment based on your interpretation of tax law or the correct application of your financial information, you can formally dispute it by submitting a 'Notice of Objection' (ADJ) via eFiling.

Common Reasons to Object to a SARS Auto Assessment

Many taxpayers find valid reasons to object. Here are some of the most common:

• Incorrect Income Figures: Your IRP5 might have errors, or SARS might have missed a certificate for income received.
• Missed Deductions: This is very common! SARS might not have all the information about your eligible deductions, such as home office expenses (if applicable), travel claims, donations to registered charities, or certain medical expenses not covered by your medical aid.
• Outdated Information: Your marital status or number of dependents might have changed, impacting your tax credits.
• Other Allowances/Rebates: Specific rebates or allowances you are entitled to might not have been applied.

If you suspect any of these apply to you, it's vital to challenge the auto assessment.

The Objection Process: Step-by-Step

If you decide to object to your auto assessment, here's a general outline of the process:

1. Provisional Acceptance (Optional but Recommended): In some cases, if there's a small refund due and you know you'll be submitting a full return anyway, you might provisionally accept the auto assessment to get the refund processed. However, this carries risks if your full return later shows you owe SARS.
2. Submit a Revised Return (if eligible for edit): If the issue is simply missing documents, submit the missing information or amend the return as allowed on eFiling.
3. File a Formal Dispute (ADJ): If a simple edit isn't enough, you will need to submit a formal objection via eFiling. You'll need to clearly state the grounds for your objection and provide supporting documentation.
4. Supporting Documents: Gather all relevant documentation to support your claim (e.g., medical certificates, RA contribution certificates, logbooks for travel, proof of donations).

It's important to adhere to the deadlines for submitting objections, as late submissions can be rejected by SARS. The 40-business-day window is critical.

Why Professional Help is Crucial for Auto Assessments

While the idea of an auto assessment seems simple, the implications of accepting an incorrect one can be significant. This is where expert guidance from My Accountant becomes invaluable.

Our Personal Income Tax services include a thorough review of your SARS auto assessment. We can:

• Verify Accuracy: Cross-reference your assessment with all your financial documents to ensure all income and deductions are correctly captured.
• Identify Missed Opportunities: Uncover any eligible deductions or credits you might have missed that could reduce your tax liability.
• Manage Objections: Handle the entire objection process on your behalf, from drafting the formal dispute to submitting supporting documentation and liaising with SARS.
• Provide Peace of Mind: Ensure you are fully compliant and paying the correct amount of tax, avoiding future penalties or interest.

Don't let the convenience of an auto assessment lead to costly mistakes. Whether you are an individual or an SME requiring tax assistance, a professional review is always a wise investment. Our Tax Dispute Resolution experts are here to assist should you need to challenge SARS.

Unsure about your auto assessment or need help objecting? Contact My Accountant today for expert assistance and ensure your tax affairs are in perfect order.