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As of July 2013 SARS declared it illegal for anyone other than a registered tax practitioner to assist people with doing their tax returns. Unless the person you know is a tax practitioner, them doing your tax return can lead to trouble for both of you.
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After you have submitted your supporting documents to SARS, they have 21 working days to review them, assuming all sufficient documents have been received. Once their review is complete, you will either:
Receive a request for additional documents; or
Receive a Completion Letter; or,
Receive an Additional Assessment
Additional Documents Request
If SARS still requires for documents from you, they will either send you an email directly with a specific request or send a letter via eFiling with the additional information required.
In many cases, SARS does require a bit more information from you and these would need to be sent to them either to the email address supplied in the direct letter or uploaded via eFiling.
You will receive a Completion Letter if all goes well and SARS is happy with your documents. This means that SARS is not adjusting your Original Assessment and if you have a refund due, it should be paid out in 7 working days (provided you have no tax debt due or outstanding tax returns from prior years). Similarly, if you owe tax to SARS per your Original Assessment, the amount you owe will remain unchanged.
An example of a Completion Letter is below:
VERIFICATION OF ASSESSMENT
We refer to the verification of your assessment for the 2018 tax period. Please note that no adjustment has been made to this assessment. However, in terms of the Tax Administration Act the South African Revenue Service reserves the right to conduct further reviews in future if required.
Should you have any queries please call the SARS Contact Centre on 0800 00 SARS (7277). Remember to have your ID number or income tax number at hand when you call to enable us to assist you promptly.
Additional Assessment (this means more tax is due!)
If however, SARS is of the view that your supporting documents do not match your tax return, they may issue you an ‘Additional Assessment”. This usually happens when SARS disallows some of your expenses and therefore issues an Additional Assessment showing the extra tax that is due.
This Additional Assessment can be confusing to taxpayers who think they need to pay the amount on it. However, it’s important to realise the amount on this assessment must not be viewed in isolation. It must be added to the Original Assessment and the OVERALL balance is the amount that is due or refundable. It is advisable to always request a Statement of Account to see the final balance that is due or refundable to/by SARS. A Statement of Account can be requested in eFiling by navigating to your tax return and clicking on ‘Request Historic Notice’.
Let’s looks at an example of how to calculate the final amount when an Additional Assessment is issued.
Loyisa submitted his tax return for 2018 and received an ITA34 (assessment) showing that he was due a refund of R4 500. As requested by SARS, he submitted his supporting documents, which consisted of an IRP5, Medical tax certificate and a spreadsheet which listed his rental expenses. After 21 working days, he received notification that an Additional Assessment had been issued on eFiling, which showed an amount of R21 200 tax due. He was very confused as to what this all meant.
He had to seek the help of a Tax Practitioner who explained the following:
He did not have to pay the amount of R21 200 on this assessment.
The final amount due to SARS was in fact R16 700 and this was calculated by adding the results of the two assessments together.
Original Assessment A -R 4 500 Refund
Additional Assessment B R21 000 More tax
Overall balance (A + B ) R16,700 Final amount owing to SARS
SARS had disallowed all of his rental expenses because he had only submitted an excel spreadsheet detailing his rental expenses, and had omitted to submit any supporting documents as proof e.g. invoices for rates, levy, water and electricity, bond mortgage statement etc. For a detailed blog on why SARS may have disallowed your expenses, please read here.
If he had in his possession (or could obtain) supporting documents for all of the rental expenses as described above, he could dispute this additional assessment.
To delay having to pay R16, 700 until the dispute is resolved, he should also raise a ‘Suspension of Payment’ at the same time that the dispute is raised. Please read more about this here.
Let’s look at the Additional Assessment in more detail. How did Loyisa’s Tax Practitioner know that SARS had disallowed his rental expenses?
When you receive an Additional Assessment, we suggest you print it out and compare it section by section to the Original Assessment that you received. For example, start with the Income section and look at Employment Income, then Local Interest Income, next Capital Gains, and then Local Business etc. Highlight any differences that you see between the two assessments. Once you have finished comparing the income sections, look at the Deductions Allowed section to see if there are any differences here. Once you have gone through the entire assessment and identified which sections have changed, you can then work out which expenses SARS may have disallowed (or in some cases, where they have included additional income).
You can also scroll down to the very bottom of the Additional Assessment. Here you should see a new ‘Declaration Section’ with an ‘Adjustment Reason’. Here SARS should state which section has been changed and also give a reason. This is a very important section to look at -it should help you understand why your assessment has changed.
Following on from our example, Loyisa’s Tax Practitioner would have identified that the taxable profit within the Local Rental Income section was more in the Additional Assessment when compared to the Original Assessment. When reviewing each expense line item within the rental section, he would’ve seen that all of the rental expenses in this new assessment had changed to R0 which would have alerted him to the fact that they had all been disallowed.
We see examples like this in real life quite frequently. If your supporting documents are unclear and difficult to reconcile, SARS’s auditors don’t have the time to sift through them trying to make head or tail of them – they will simply disallow all of your business expenses, or in this case, all of Loyisa’s rental expenses.
If he had scrolled down to the bottom of the Additional Assessment he would’ve seen the below block which confirmed that the rental expenses had been disallowed.
SARS seems to have become even stricter with their document requirements this year. Below are some other common pitfalls where we see taxpayers falling short.
Business travel deduction
This will be disallowed if you do not submit a valid logbook in the required format. Also we are seeing increasing cases, where SARS disallows the travel deduction if you do not submit the vehicle purchase contract in your name (with date, cost price of car etc.)
If SARS has disallowed your business travel, you may see this block at the bottom of your Additional Assessment:
SARS may disallow some (or all) of your additional qualifying medical expenses that you paid personally and did not submit to the Medical Aid i.e. these are expenses which do not reflect on your medical tax certificate. This usually happens where taxpayers have submitted a list of these medical expenses but have not submitted both the medical invoices and receipts/proof of payments to support the expenses.
Remember, as a rule of thumb, it is best to submit ALL of you medical bills to your medical aid even if you have run out of medical savings and know the medical aid will not pay for them. If you do this, the amount of medical expenses that are not reimbursed by the medical aid, will appear on the medical tax certificate and SARS usually accepts this amount without requesting further proof (although this may not always be the case!).
If your additional medical expenditure has been disallowed, the Adjustment reason on your Additional Assessment may look like this:
Local business expenses
For those of you that are self-employed, you need to be very thorough when submitting your documents to SARS. If SARS are not satisfied with them, they will be disallowed which will result in more tax being due.
The Adjustment reason on your Additional Assessment may look like this (similar to our rental example earlier):
The two most common deductions claimed here are Home Office and Wear and Tear. Again, SARS are strict here and will disallow your expense claim if you do not supply all of the required documents (which would include supporting calculations as well as the relevant invoices and receipts).
If SARS has disallowed these expenses, the Adjustment reason on your Additional Assessment may look like this:
I have received and Additional Assessment – what can I do about it?
As mentioned earlier, if you disagree with the Additional Assessment and think you have a valid case to object it, you can raise a dispute on eFiling. In the dispute, you will need to give a valid reason explaining why you disagree with SARS’s updated assessment and you will also need to submit all supporting documents to justify the objection. Be sure to submit your dispute within 30 working days of receiving the Additional Assessment. If you are late in doing so, you will have to give reasons as to why you are late and the process can become even more cumbersome.
Once you submit your dispute, SARS can take up to 60 working days to review it. If they allow the dispute, you will receive notification of a ‘Reduced Assessment’ – this is good news and means less tax to pay! Again, you need to add this assessment to the others to arrive at an overall balance.
Following on from our example, let’s assume that Loyisa’s Tax Practitioner had filed a dispute, and SARS had been satisfied with all the rental expense documentation that he had submitted. SARS would then issue a Reduced Assessment which would reverse the previous Additional Assessment, so that Loyisa’s tax refund is now back to the original amount.
Original Assessment A -R 4 500 Refund
Additional Assessment B R21 000 More tax
Reduced Assessment C -R21,000 Less tax
Overall balance (A + B + C) –R4 500 Final refund amount
Hopefully this blog clarifies many of your questions around Additional Assessments and will help you to understand them better going forward. If however, you are still left confused, please don’t hesitate to contact our Helpdesk where one of our expert Tax Practitioners is always on standby to assist.