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Wealth Masters - Are you prepared for a SARS Audit?

Updated: Mar 22, 2023

Article by Anneline Lamond


Each year, many South Africans get audited by SARS, but do you know what's needed to be prepared for such an audit? We have the ultimate guide to help you prepare.


What is the difference between a verification and an audit?

A Verification is a "face-value" authentication of the information declared by the taxpayer on their return. SARS will notify the taxpayer if they may be subject to verification. SARS will conclude this within 21 business days of receiving all the required material.


On the other hand, an audit is a more in-depth examination of the taxpayer's financial and accounting records or supporting documents to determine whether they have correctly declared their tax position to SARS. Progress reports of the audit stage will get issued at intervals of 90 calendar days from the date of the audit notification.


Our top tips:

  • Have all of the relevant supporting documents on hand so that you aren't left trying to find documentation when you have a limited time

  • Ensure that the file type requests by SARS are adhered to when the material is uploaded

  • You can upload up to 20 records with a file size of 5MB per document.

VAT Audit:

No company wants to have a VAT audit, but it is, unfortunately, a reality for some. If your VAT calculations and information provided are accurate, then you should have no concerns.

Here are a couple of things that SARS looks out for:

  • Accurate VAT Report

  • Various invoices (SARS will request the highest invoices Input and Output)

  • VAT Recon

Business owners often make these mistakes when it comes to VAT

  • Non-disclosure of all sales

  • Incorrect disclosure or failure to disclose Input VAT on Capital goods

  • Output VAT payable on insurance claims received and the sale of an asset

  • Reconciliation of accounting records to the VAT returns before submission

  • Incorrect bookkeeping or failure to disclose Penalties and interest

Personal income tax

Suppose you will be making tax deductions on your personal income tax. In that case, you must have all the supporting documents for any expenses relating to the operation of your business.

Here are a few of the major expenses you can claim as deductions.


Home office expenses:

When claiming expenses for your home office in your primary residence, Your Accountant will calculate the area based on the following formula:


A = the area in m2 of the part specifically equipped and used exclusively for business

B = the total size of the residence in m2

Total costs = the costs incurred that are linked closely to the premises (such as rent, rates and taxes, repairs, and electricity), excluding expenses of a capital nature.


Documentation requested:

In such a case, SARS may request the following:

  • Floorplan of your residence

  • Pictures of your office space

  • Depreciation schedule (if applicable)

  • Internet and telephone invoices

Rental on property/s registered in your personal name

As we always reiterate, it is always best to purchase properties directly in your Trusts; however, if you have properties registered in your personal name and you are renting them out, then:

  • You must declare all income and expenses related to the specific property

  • You should have all the relevant documents to support your return

  • You must supply your bond statement

  • Always submit records of your rates and taxes

  • Submit your monthly levy statements

  • Keep records of all repairs and maintenance costs

Claiming a deduction for the use of a motor vehicle:

  • be sure to accurately record your motor vehicle's odometer reading on the first day of the tax year (1March)

  • Keep a logbook throughout the year

  • Record your motor vehicle's closing odometer reading on the last day of the tax year (28/29 February)

There are many examples of a SARS logbook online, but if you want more information, don't hesitate to contact your Destinata Accountant for a template.


Trusts:

Our members have multiple Trusts in specialised structures, and SARS will often verify Trusts. Ensure you send all the relevant information to your Accountant before drafting the Trust financial statements. This information and all records are critical.


Having the Trust financial statements up to date can prevent you from paying extra, unnecessary taxes. If you are a Trustee of a Trust, you must ensure that before submitting your personal income tax, your Trust financial statements are complete and ready for submission.


There are a couple of supporting documents which need to get uploaded to SARS for Trust verifications:

  • Rental income & expenses schedules

  • Rental statements (if you make use of a rental agent)

  • Repairs and maintenance invoices

  • Bond statements

  • Levy statements

  • Municipality statements

If you claimed any expense, SARS wants proof of the payment.


Note: SARS warns that new administrative penalties will take effect from 1 December 2022. The new penalties relate to the late submission of a tax return.


While we share as much information as possible to help you feel ready and equipped for any potential audit, it is best to ensure you have the right team on hand to help you be prepared for any situation. If you, or someone you know, is looking for assistance with business, personal or Trust accounting, then get in touch, and we will gladly assist. Send a request via the button below.

Contact us to assist you with upgrading your membership status to enjoy all the benefits of being part of the Club.

Here is your unique link to allow your members to register for our ongoing webinar:



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