THE 31 AUGUST GUESSING GAME
- Heather Flack
- 3 hours ago
- 4 min read
Provisional tax asks you to predict your profit – and penalises you for getting it wrong either way Most taxes ask what you earned. Provisional tax asks what you are about to earn – and bills you for guessing wrong. With the first payment due on 31 August, here is how KZN businesses can get the number right. Most taxes look backwards. They ask what you earned, and take their share.
Provisional tax is the odd one out: it asks what you are going to earn, over a year that has not yet finished, and then attaches a price to guessing wrong. For the large slice of the business population who pay it, the closing days of August bring a peculiar kind of stress – not “can I pay?”, but “have I guessed right?” With the first provisional payment for the 2027 tax year due on 31 August 2026, every company, every sole trader and every individual earning meaningful business, rental or investment income above the tax threshold must put a firm number on income the year is still producing. Pitch it too low and SARS can add a penalty and interest; pitch it too high and you have handed the state an interest free loan while your own working capital tightens.
And this year the stakes are sharper: with SARS’s data-matching at full tilt – the same machinery we wrote about last month – a careless estimate is far more likely to be questioned. Two compulsory payments, an optional top-up, and two ways to be penalised. Always confirm dates on SARS eFiling.
Who Gets Caught, and When
Provisional tax is not a separate tax – it is simply tax paid in advance, in instalments, on income that has no PAYE deducted along the way. Companies fall into the system automatically. So does any individual who runs a business, or whose interest, dividends and rental together clear a modest annual floor, once total taxable income tops the tax threshold (R99 000 for the under-65s in the 2027 year). The logic, in SARS’s own framing, is kindness wrapped in paperwork: spread the liability across the year so that no one is ambushed by a single, crippling bill in February.
Two Ways to Get it Wrong
Underestimate, and the penalties are real. Where your final taxable income lands materially above your second period estimate, SARS can levy an underestimation penalty of 20% on the shortfall, with interest stacked on top. The exposure is not trivial: on a six-figure under-call, the penalty alone runs into tens of thousands of rand. The first payment is gentler than it looks. SARS pre populates your IRP6 with a “basic amount” drawn from your last assessment – nudged up by 8% a year if that assessment is more than 18 months old – and provided you pay at least that, the first period carries no underestimation penalty.
The trap is the second period in February, where your estimate is tested against reality: broadly, you must reach 90% of your actual taxable income (or the basic amount) if you earn under R1 million, and 80% if you earn more. Fall short, and the 20% penalty bites. Getting the number wrong is one risk; missing the date is another. The IRP6 must be filed even when the calculation comes to nil, and a late payment draws a separate 10% penalty no matter how accurate the estimate behind it was. Two deadlines, two distinct ways to be charged – and SARS treats them independently.
Why KZN Feels it More
The businesses with the hardest guessing job are exactly the ones this province is built on. Sugar and agriculture on the north coast, where income swings with the harvest and the global price. Coastal tourism and hospitality, weighted towards a summer season that lands well after the August estimate is in. Retailers banking on a festive quarter they must somehow foresee in the depths of winter. For all of them, a “basic amount” lifted from a flat prior year is a poor guide – it overcharges a business coming off a weak year and undercharges one heading into a strong one, and either way the cash-flow consequences are felt locally. That is the real point. Provisional tax was designed as a cash-flow tool, a way to spread the pain. Treated as an afterthought in the last week of August, it becomes the opposite – a scramble that ends in penalties, or an over-payment the business can ill afford to leave with SARS. Treated as a rolling forecast, refreshed off real management accounts through the year, it becomes routine.
The Deadline is Fixed; the Guess is Not
The businesses that move through 31 August without drama are rarely the lucky ones. They are the ones who kept their books current enough to estimate well, and who treated the IRP6 as a forecast worth getting right rather than a form to rush at the buzzer. With SARS now watching the gap between what you predict and what you earn more closely than it ever has, a good guess has seldom been worth more.
T: +27 (0)31 207 1572
M: +27 (0)76 555 7529