What is a Penalty Assessment Notice from SARS and How to Respond?

If you fail to comply with your tax obligations, you’ll likely receive a Penalty Assessment Notice from SARS (South African Revenue Service). 

This notice serves as a formal warning that SARS has imposed a penalty on you as an individual taxpayer or a small business owner, perhaps for submitting late or missing a payment. Taxpayers will need to respond to avoid further charges. 

There’ll be escalations if you fail to address the penalties, so it’s crucial to understand what a SARS notice entails and how to resolve the issue.

Understanding a Penalty Notice from SARS

A SARS penalty notice is an official message issued by SARS to let you know you’ve violated some kind of tax rule. Typically, these notices relate to a late submission or a failure to make payments. The notice outlines three key pieces of information:

1. The type of penalty
2. The amount
3. The reason for the charge

Each penalty type carries different financial consequences for you, depending on the severity of the violation.

Types of Penalties issued by SARS

SARS issues several types of penalties, with the most common being administrative penalties for failure to submit returns and penalties for failure to pay taxes on time. SARS Administrative Penalty Assessment Notices lead to recurring monthly charges based on the taxpayer’s income, up to a maximum of 35 months, or 47 months if the taxpayer’s address is unknown. The severity of the penalties increases depending on how long the violation has gone unresolved. 

These penalties can be quite harsh and will add up into a nasty surprise if you miss or ignore a notice.

Failure to File Penalty

Failing to file your tax returns by the SARS deadline triggers a monthly penalty, which continues to accrue until you submit your return or until the penalty reaches the maximum duration of 35 months.

They base the penalty amount on your income bracket and ranges from R250 to R16,000 per month.

The penalty applies for each month the return remains outstanding. 

Failure to Pay Penalty

SARS imposes a failure-to-pay penalty if you miss the tax payment deadline. They calculate this penalty as a fixed rate of 10% of the outstanding tax balance. While the percentage doesn’t increase, the penalty continues to accumulate as long as you don’t pay the tax. Additionally, SARS may charge interest on the unpaid amount, which can further increase what you owe. 

To avoid escalating penalties and interest, it's important to settle the outstanding balance as soon as possible.

Fixed Penalty Scales Used by SARS

As outlined above, SARS determines the failure to file a penalty amount based on your income bracket. Here’s a breakdown of the scale:

How to Respond to a SARS Penalty Assessment Notice

Once you receive a SARS Penalty Assessment Notice, it’s important to act quickly. Here’s how to respond:

• Review the notice - Check the penalty details and the reason for the charge.
• Check your tax returns - Check if you have submitted your returns and made your payments. If you missed any returns or payments, submitting them will stop the penalties from continuing to accrue.
• Resolve the penalty - If you have made a mistake, pay the penalty to avoid any further accumulation. . You can make payments through SARS eFiling or via other payment methods. If you cannot afford the full amount, you can request a payment plan.
• File an objection if necessary - If you think SARS have made an error, you can file an objection. First submit a Request for Remission (RFR) via eFiling, providing reasons for your dispute. If the RFR is unsuccessful, you can then proceed with filing a formal objection​.

These steps help ensure you're responding effectively to a penalty assessment notice and preventing further financial or legal issues with SARS.

How to Check Your SARS Tax Return for Errors

To avoid penalties, regularly check your tax returns for discrepancies. You can do this by logging into SARS eFiling and reviewing your submitted returns.

To log into SARS eFiling, visit www.sarsefiling.co.za and enter your username and password. If you don’t have an account, you can register directly on the site by clicking “Register,” or download the SARS MobiApp and register from there.

If you spot an error, contact SARS directly. You can contact SARS via their Contact Centre at 0800 00 SARS (7277), or use the Help-You-eFile service, which allows you to interact with a SARS agent directly through your eFiling profile

Alternatively, you might consider getting help from a tax professional to correct the issue before penalties escalate.

Appealing or Objecting to a SARS Penalty

As mentioned above, you can file an objection if you believe SARS have given you a penalty in error. Submit your objection through eFiling with supporting documents to justify your claim.

Supporting documentation might include:

• An explanation of the circumstances that meant you missed a filing or payment deadline.
• Relevant Tax returns or financial records
• Proof of payment (receipts or bank statements of attempts to settle the payment)
• Correspondence with SARS if relevant
• Any other documents that support you case. Perhaps a medical certificate or a legal document showing unforeseen circumstances that meant you couldn’t comply. 

You have 30 business days from receiving the notice to submit the objection, and SARS will review your appeal before deciding whether to waive the penalty.

Tips to Avoid Future Penalty Assessment Notices from SARS

Here are some practical steps to help you stay on top of your tax obligations to avoid penalties:

1. Submit your tax returns on time - Make a habit of tracking all key SARS deadlines. You can set up reminders on your phone or calendar to ensure you don’t miss any important dates.
2. Pay your taxes promptly - Set aside money for your taxes each month so you’re not caught off guard. This way, when the deadline approaches, you’ll be ready to settle your tax payments without stress or penalties.
3. Keep your financial records up to date - Regular bookkeeping can save you a lot of headaches during tax season. By staying on top of your records, you’ll be ready to file returns easily, avoiding any last-minute rushes or potential errors.

Taking these steps will help you maintain compliance with SARS and give you peace of mind, knowing that you’re well-prepared and organised throughout the year.