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Assets and Liabilities declaration – Directors, Members and the Self Employed.

Are your tax returns accurate? Here is how SARS can test whether they are.

A couple of decades back the tax collection system was archaic, and collection was reliant on brain power. It is no wonder that cheating on tax became a favourite pastime like going to the beach or having a braai.

Well, this is no longer the case. There are multiple publications with write-ups on the vastly improved system of SARS and the impending improvements because of artificial intelligence (AI). These improvements have already extended into ingenious ways in which the SARS auditors can go after those who do not contribute their share to the Treasury’s coffers.

If you think that cheating on your taxes is possible, here are a couple of ways that SARS can catch you as well as some of the improvements underway in the system:

1) Unexplained growth in assets

Taxpayers who conduct business for their own account including Directors of Companies, Members of CC’s, Sole Traders, have to complete a Statement of Assets and Liabilities as part of their Annual Income Tax returns. The statement of Assets and Liabilities must include all assets and liabilities at cost.

The Statement of Assets and Liabilities is used to produce a Life-Style report which indicates whether your income and changes in asset base can validate the lifestyle you are living.

For example if your asset base grows by R500 000 but you only had net income of R300 000 then this will make SARS suspicious: Why? The question is how does your next asset base grow by R500 000 if your net income was only R300 000 when you still have normal living costs to cover as well?

2) Car expenses

SARS can check out registration numbers on their computer systems and would easily know what kind of salary is required to purchase and maintain a fancy car and whether you are in fact declaring income that can validate that purchase.

3) Property Costs

A Simple deeds office search can enlighten a SARS auditor of exactly how much you have paid for your property and whether you have a bond against that property. This information will then indicate what salary is required to acquire that property.

4) Travel Allowances

Inflating odometer readings is one of the oldest tricks to inflate a travel allowance claim. A SARS Auditor is well within their rights to call you to arrange for the vehicle to be made available for inspection, where they can rock up at your home or workplace to inspect the vehicle. SARS has specific requirements when it comes to the format and completion of logbooks.

5) Agrieved parties

SARS receives many of their tip offs from ex-wives, ex-girlfriends or ex-employees. The SARS tip-off line has been used in many cases as a method that has caught tax evaders. The moral of the story is do things according to the book because you don’t know who will report you if you are cheating on taxes.

6) Digital Taxes

Many taxes are now becoming digital meaning that a cryptographic marker can be placed on source documents. This means that cooking VAT returns with “fake” invoices will no longer be possible. SARS will be able to trace back to vendors and ensure there is a supplier invoice to match the debtors invoice, and if this is not the case the transaction will be rejected from the claim.

Call Zeelie Professional Accountants SA today to assist with your Tax Returns to ensure what you have declared is in fact correct and compliant.

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