South Africans receiving Sars auto-assessments are urged to check them carefully, particularly if they made two-pot retirement withdrawals or earn additional income. Financial experts warn that overlooking errors could result in unexpected tax liabilities.
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South Africans receiving auto-assessments from the South African Revenue Service (Sars) over the next two weeks are being urged to review them carefully before accepting them, particularly if they have made withdrawals under the two-pot retirement system or earn additional income through freelancing or side businesses.
While Sars' automated assessment process has made tax filing quicker and more convenient, financial experts warn that taxpayers remain legally responsible for ensuring the information reflected is complete and accurate.
According to Thys van Zyl, chief executive officer of Everest Advisory Services, many South Africans still treat tax season as an annual administrative task rather than an opportunity to review their overall financial position.
"Tax season should not simply be seen as another form that needs to be completed. Taxpayers who receive auto-assessments should carefully review their income, deductions, medical tax credits, investment income, retirement fund contributions and any two-pot withdrawals before accepting the assessment," he says.
Sars has significantly expanded its use of third-party data over the past few years, drawing information from employers, banks, medical schemes, retirement funds and investment providers to pre-populate tax returns. The tax authority says the initiative is designed to simplify filing, reduce administrative burdens and improve compliance.
However, Van Zyl cautions that taxpayers should regard an auto-assessment as a starting point rather than a final calculation.
"Sars systems are far more advanced today and make use of information submitted by employers, banks, medical schemes, retirement funds and other third-party data providers. However, taxpayers should view an auto-assessment as a draft assessment rather than a final tax calculation. If any information is missing or incorrect, the tax return should be amended and submitted," he says.
His warning comes as thousands of South Africans prepare to file tax returns during a period that also reflects the first full tax year in which withdrawals made under the two-pot retirement system will appear on taxpayers' records.
The retirement reform, introduced in September 2024, allows retirement fund members to access a portion of their retirement savings before retirement under specific conditions. While the system has provided much-needed financial relief for many households grappling with the rising cost of living, tax specialists have repeatedly warned that these withdrawals are not tax-free.
Recent figures released by the Financial Sector Conduct Authority (FSCA) show that millions of withdrawal applications have been processed since the implementation of the two-pot system, with billions of rand paid out to members. The high uptake reflects the financial pressure facing many South Africans but also increases the likelihood that taxpayers could face unexpected tax obligations during filing season.
According to Van Zyl, one of the biggest misconceptions is that money withdrawn from the savings component is effectively free cash.
"For many taxpayers, this may be the first tax season in which the full tax implications of withdrawals from the savings component of the two-pot retirement system are reflected in their tax records. The biggest misconception is that such a withdrawal is tax-free emergency funding or simply a bonus. That is not the case," he says.
He explains that withdrawals from the savings component form part of an individual's taxable income and can affect the amount of tax ultimately payable.
"When your annual tax assessment is calculated, your total taxable income may still be higher than expected, which could result in an additional tax liability. While the two-pot system may help relieve short-term financial pressure, every withdrawal carries tax consequences and may simultaneously reduce the future compound growth of your retirement savings," he says.
Van Zyl says taxpayers should carefully compare the information contained in their auto-assessment with their own supporting documents before accepting it.
"Make sure that your IRP5 and IT3 certificates, medical scheme contributions, retirement fund contributions, investment income, rental or freelance income, and any two-pot withdrawals are correctly reflected on your tax return. Even small discrepancies can ultimately have a significant impact on your final tax assessment," Van Zyl says.
He adds that taxpayers often assume that because Sars has pre-populated their returns, everything is automatically correct.
"A simpler process does not mean less responsibility. The ultimate responsibility for ensuring that all income, deductions and tax information are complete and accurate still rests with the taxpayer. Take the time to review your assessment carefully. Those few extra minutes could save you significant money, time and unnecessary administration later," he says.
Beyond tax compliance, Van Zyl believes filing season should serve as an opportunity for South Africans to assess their broader financial wellbeing.
"Every withdrawal, deduction and investment income item forms part of your broader financial picture. Tax season should therefore be viewed as an annual financial review rather than merely an administrative deadline."
He also warned taxpayers to remain vigilant against fraud, as cybercriminals frequently exploit filing season to target unsuspecting individuals through phishing emails and fraudulent SMS messages designed to steal personal information or banking details.
"It is important to be especially cautious of phishing emails and SMS messages, and not to click on links indiscriminately. Only use official Sars platforms and ensure that you are dealing with an authorised person. Remaining vigilant is essential." he says.
PERSONAL FINANCE