What Happens If SARS Audits Your Expense Claims

What Happens If SARS Audits Your Expense Claims

The word "audit" produces more anxiety among South African self-employed professionals than almost anything else in the tax calendar. Most of the time, the fear is disproportionate to the actual risk - but only if your records are in order.

If they are not, an audit can turn a straightforward tax return into a months-long process that ends with disallowed deductions, back taxes, penalties, and interest.

What triggers SARS attention?

SARS does not publish an official checklist of audit triggers. The following is based on publicly known SARS risk-assessment practices and SA tax commentary - factors known to attract attention, not a definitive official list.

Large deductions relative to income. If your expense claims represent an unusually high proportion of your gross income compared to industry norms, SARS automated systems will flag this.

Significant year-on-year changes. A consistent pattern of claims followed by a sudden large deduction in a single year can attract attention.

Industry benchmarks. SARS maintains data on what different types of self-employed professionals typically claim. Significant deviations are a risk indicator.

Third-party data discrepancies. SARS receives data from employers, banks, medical schemes, and other institutions. If your return does not align with what those third parties have reported, it creates a discrepancy that may trigger a review.

Verification vs audit: the difference matters

Not every SARS query is a full audit.

Verification is a limited review of specific items on your return. SARS sends a document request and must conclude the verification process within 21 business days of receiving all required documentation from you.

Audit is a comprehensive examination, potentially covering multiple tax years. SARS issues an Audit Findings Letter and must give you at least 21 business days to respond. Your specific deadline is stated in the letter - the 21-business-day minimum is the floor, not a uniform rule.

What SARS will ask for

Whether verification or audit, SARS requests documentation that supports specific claims:

• Mileage claims: your logbook with date, km, starting point, destination, and business purpose for every trip, plus annual odometer readings
• Expense deductions: invoices, receipts, and bank statements matching the claimed amounts
• Home office: floor area calculation, plus invoices for rates, electricity, cleaning, and rent

Documentation must be contemporaneous. Records reconstructed after SARS makes contact are not the same as records kept at the time.

How to respond

• Read the letter carefully and identify exactly which claims are under review
• Gather only what is requested, clearly organised
• Respond within the deadline stated in the letter
• Engage a tax practitioner if the amounts are material
• Never ignore the request - a SARS query with no response defaults to disallowance

How long must you keep records?

Under section 29 of the Tax Administration Act No. 28 of 2011, records must be kept for five years from the date of submission of the return - not from the date of assessment.

If records relate to an ongoing audit, objection, or appeal, keep them until that process concludes regardless of how long it takes.

The only real protection is records

An audit is not inherently a fine. Many taxpayers who receive SARS queries respond with their documentation and the matter closes. The cases that become expensive are the ones where records do not exist.

Expenstry maintains an immutable audit trail for every expense and every trip. When SARS asks, everything is there - timestamped, complete, and export-ready.

Start your 30-day free trial at expenstry.com - no credit card required.