As the 2023 tax season unfolds, the South African Revenue Service (SARS) has once again initiated its fully automated assessment process, actively promoting it as a way to simplify the process for taxpayers with less complex tax affairs. In most instances, the process works pretty well, but for this filing season, there seem to have been a few issues that have created a degree of frustration among a number of taxpayers.

In 2021, SARS piloted the concept of automatically issuing assessments for taxpayers with straightforward tax affairs, replacing the need for manual submissions through the eFiling service. Initially, taxpayers were provided with the option to “accept” a pre-generated assessment, which still provided a sense of control over their tax returns. But this year, SARS decided to take things a step further by fully automating the assessment process and eliminating the accept or reject choice altogether. Taxpayers are now left with no option but to file corrections or objections after the fact, adding to the uncertainty and frustration.

The Editing Facility – The Button Doesn’t Work

Theoretically, taxpayers should be able to edit their returns to make corrections, but this functionality is currently unavailable. The button meant to enable corrections appears non-functional, leaving taxpayers puzzled about the implications it may have on their tax assessments. The lack of clarity from SARS on this matter has added to the confusion and uncertainty surrounding this year’s fully automated system.

Correcting vs. Objecting: One Chance Only

Taxpayers who receive an auto-assessment have a limited window of 40 business days to request a correction if needed. However, the process allows only one correction submission. Once corrections are submitted, a verification procedure is triggered, requiring taxpayers to upload all the required documents within 21 working days. After verification, no further corrections are allowed, leaving taxpayers with little room for error.

Objecting, on the other hand, is intended for reporting inaccuracies in the assessment and/or supporting third-party-provided data. However, the objection process does not permit adding any new information. For example, if a taxpayer realises they forgot to include a retirement annuity (RA) during the correction phase, they will lose the opportunity to add it during the objection stage. The time frame for lodging an objection is limited to 21 business days after the assessment is issued.

Lost Opportunities and Urgency for Documentation

While SARS presents the automated assessment system as a way to simplify tax affairs for most, a number of taxpayers are finding themselves at a disadvantage. The fully automated system does not provide them the opportunity to claim benefits they may have been entitled to without lodging a correction or objection. Furthermore, the time frame for providing supporting documents has been significantly reduced compared to previous years, adding pressure and urgency for taxpayers to gather and submit the necessary paperwork, where they are at the mercy of the third party who initially supplied the data to SARS.

Taxpayer Cases Requiring Swift Action

Various scenarios necessitate prompt action to submit corrections or objections. By way of example:

• South African residents working overseas and earning under the R1.25 million threshold, protected by a Double Taxation Agreement (DTA) with South Africa, must provide verifiable proof to avoid double taxation.
• South African seafarers, typically entitled to tax relief, need to apply for exemptions.
• Non-residents with interest earned in South Africa must ensure they meet specific requirements for income tax exemption.
• South Africans living overseas and receiving a South African living annuity must submit documentation to ensure appropriate taxation according to the applicable Double Taxation Agreement.

Missed Tax Benefits and Refunds: A Real Possibility

Taxpayers should be vigilant about potential unclaimed tax benefits and refunds that SARS might be unaware of. Opportunities for missed benefits may include claims related to travel logbooks, donations to public benefit organisations, unreimbursed large medical expenses, unregistered retirement annuity contributions, valid and justifiable home office expenses, and any legitimate rental losses.

Navigating Auto-Assessment: A Delicate Balance

The bottom line is that taxpayers should be careful about hastily filing corrections as soon as they spot errors in their assessments. Instead, it is recommended that one take time and due consideration when compiling all necessary documentation and thoroughly reviewing the assessment for discrepancies. Submitting corrections after careful preparation will optimise the available time for submission and ensure accuracy and completeness.

In conclusion, SARS’ fully automated assessments are causing some degree of chaos and uncertainty for some taxpayers. While the system may hugely benefit those with straightforward tax affairs, it presents some challenges for many others. The reduced time frame and limited correction opportunities require taxpayers to act swiftly and diligently. Moreover, the lack of clarity on certain aspects of the automated system adds to taxpayers’ concerns. Staying informed by keeping an eye on any SARS communication, being proactive, and striving to be compliant are crucial to navigating this new era of automated tax assessments. On a positive note, as these issues get reported and then subsequently dealt with, the entire process of auto-assessments will improve over time. SARS wants to ultimately ensure a seamless and easy process exists for taxpayers to be compliant and thus fulfil their obligations from a tax perspective.