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Do you really need a tax advisor?

25 September 2014   (0 Comments)
Posted by: Author: Lesedi Seforo
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Author: Lesedi Seforo (SAIT Technical)

"Why tip someone for a job I’m capable of doing myself? I can deliver food. I can drive a taxi. I can, and do, cut my own hair. I did, however, tip my urologist, because I am unable to pulverize my own kidney stones.” – Dwight Schrute, a character from the US version of the popular TV series ‘The Office’.

A lot of people tend to have the same mind-set regarding tax specialists. They reason "why pay someone to do my taxes when the nice lady at SARS said she could do it for me if I bring my IRP5 and medical aid certificates?” Then there are those funny SARS adverts with the overweight guy submitting his tax return on the SARS e-filing website. The theme? Anyone can be good at tax. I put it to you, as Barry Roux would say, that not anyone can be good at tax.

Tax is best compared to a river, where water is constantly flowing, as opposed to a dam, where everything remains stagnant for long periods of time. The yearly amendments to the law are so numerous, even tax practitioners have a difficult time keeping abreast of the changes. If it is difficult for the specialists to keep up with the changes, how much more the lay person? Sometimes a tax advisor will casually be asked a question based on an article someone read in a reputable website, to which he will respond "that used to be the case in back 2013 but the law has changed so that is no longer allowed”. This illustrates just how specialised tax really is.

Unclaimed deductions

When tax practitioners take on new clients, they will typically do a quick check-up on the person’s tax situation. A lot of times the check-up will reveal legitimate unclaimed deductions on certain expenses incurred over a number of previous years. If the person would have known that they could have claimed such deductions, their tax owed to SARS could have been thousands of rands lower.

Take the example of a person who bought an apartment and leases it out to a tenant. Let’s assume such a person submits their own tax return and declares the rental income and claims obvious expenses like water and electricity. If this person is not aware that the apartment is located in an "urban development zone”, he will not claim the so-called ‘UDZ deduction’ applicable to certain properties located within such regions, thus losing a major tax benefit.

Suppose that the taxpayer then reads a tax article two years later which alerts him of the ‘UDZ deduction’. He may then think since the tax return from two years ago was submitted and assessed by SARS, the matter is closed; not knowing of a law that allows a taxpayer to re-submit corrected tax returns for as far back as three years ago for income tax purposes, without going through the objection and appeal process. Imagine, year after year unknowingly overpaying tax, how sad. We see this all the time. On many occasions here at SAIT we’ve given guidance to tax practitioners and helped them get these previously unclaimed deductions for their clients.

Understatement penalties    

In addition to losing out from not claiming legitimate deductions, a person who submits his own tax return could potentially be penalised by SARS for making a mistake in his tax return. Where a person makes an incorrect statement in a tax return or omits an amount from a tax return, as a result of which his tax owed to SARS ends up being lower than what it would have been had he not made the incorrect statement or omission, a so-called "understatement” arises on which SARS would levy an understatement penalty.  After a public outcry to this rule, National Treasury decided in 2013 to make an exception for understatements arising from bona fide inadvertent errors (i.e. mistakes). Because "bona fide inadvertent error” is not defined in a tax Act, it takes its ordinary dictionary meaning. SARS has indicated that it will develop guidance regarding the meaning of that phrase and publish it for the use of taxpayers and SARS officials.

The main risk for taxpayers with the understatement penalty, however, is proving that an error was indeed inadvertent. This may be easier said than done, especially since there is no SARS guidance on the matter. Furthermore, there are so many different penalties that could potentially be levied on a person for his/her SARS assessment that most people tend to just pay them and don’t attempt to have them waived by SARS. This is another benefit of having a tax advisor, they are able to determine which penalties can be waived and then apply to SARS for the waiver.

Furthermore, where a taxpayer’s mistakes resulted in a substantial understatement (meaning that the understatement exceeds the greater of 5 per cent of the tax properly chargeable or R1 million), SARS must remit the understatement penalty if satisfied that the taxpayer was in possession of a tax opinion from an independent registered tax practitioner that must meet certain criteria. Bigger companies are therefore advised to seek the help of SAIT registered tax practitioners to assist them with their complex transactions and to provide tax opinions where the circumstances so warrant it.

In conclusion

Because tax is such a specialised field, it is therefore always better to have it sorted by someone who knows what they are doing. The lay person is just at too much of a disadvantage in these matters to attempt to do them himself, even if he may have only two income sources and a few deductions available to him. The good thing about SAIT-registered tax practitioners is that they must adhere to SAIT’s policy on continuous professional development (CPD) in order to remain members. SAIT tax practitioners must log at least 15 verifiable CPD hours every year, which can be done by the practitioner watching tax videos, reading articles and attending seminars and answering questions on the latest tax updates. This is our attempt to ensure that our members maintain a certain level of standard in their tax knowledge so that they are better able to give the best advice to members of the public.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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