Are auto assessments taking away taxpayer rights?

The official start of the South African Revenue Service (Sars) 2023 filing season for individuals and trusts commenced on 7 July. This is a break from tradition in that the season normally commences on the first day of July.

In fact, Sars started a week earlier – it began notifying taxpayers that they had been auto-assessed on 30 June.

Taxpayers are able to check if they qualify for auto assessment via the Sars Online Query Service functionality on the Sars website.

Read: Taxpayers should be mindful of filing season changes

Meanwhile, some auto-assessed taxpayers had already received their refunds even before the official opening – and at that time had not had an opportunity to query their assessments.

Some tax professionals and taxpayers believe the revenue authority should give taxpayers the option to accept or reject their assessment before a refund is paid out. This is one potential area of improvement that could be made to the auto-assessment system.

Mixed reaction

These early filing-season payments caused a stir of excitement on social media – though some taxpayers were delighted to receive their refunds, while those who missed out expressed disappointment. There were memes doing the rounds on Facebook and witty videos on TikTok regarding the tax filing season.

One thing is encouraging – people are starting to engage more proactively with their tax affairs.

A welcome improvement in the tax filing season is the alignment of deadlines to 23 October 2023 to put all individual taxpayers on an equal footing.

The same deadline now applies to taxpayers who submit their own ITR12 returns (that is, not automatically assessed) and to those who are auto-assessed and wish to edit their auto-assessed returns.

In the last filing season, taxpayers who were auto-assessed only had 40 days in which to edit their returns; this year they have 108 days.

Onus on the taxpayer

Taxpayers need to understand that filing a correct tax return ultimately remains their responsibility, and an auto-assessment by Sars does not absolve them of it.

The auto-assessment process is that Sars receives data from third parties such as employers, medical schemes, banks, retirement annuity funds, and other institutions. It uses this data to pre-populate each taxpayer’s return, thereby generating an automated assessment.

This means Sars may not be aware of any additional income or expenses that apply to the taxpayer – such as rental income, additional medical expenses and home office or travelling expenses.

The taxpayer is responsible for informing Sars and providing the necessary documentation to substantiate such additional income or expenses.

Should a taxpayer fail to do so, understatement penalties may be imposed for having filed an incorrect return by omission.

Debate

Auto-assessment has sparked a debate as to whether Sars is taking away the taxpayer’s right to file their own return.

My view is that taxpayers’ rights are adequately safeguarded by their ability to edit the return that has been auto-assessed – a right that has not been infringed upon.

On the contrary, auto assessments hold many benefits for taxpayers – as in the many instances where taxpayers no longer have to travel long distances and queue to discharge their responsibility. It is now a process that can take mere minutes.

Other taxpayers who never used to file are now receiving refunds automatically.

The new tax system also has the benefit that most registered taxpayers will have the reassurance that their returns are filed and are up to date.

Those taxpayers who have not received an auto assessment must now ensure they submit their returns before the specified deadline. Sars has started to strictly enforce the levying of administration penalties for returns that remained unfiled.

For those who have been auto-assessed – like I have – we can relax knowing that such administrative penalties are the least of our worries.

Listen:
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Sars clarifies auto assessment

Tusani Mnyandu is manager: taxation at Mazars in South Africa.