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Unlocking Success: Navigating SARS Auto Assessments for Tax Firms

Apr 12, 2024

How to adapting to SARS Auto Assessments and keep your tax firm sustainable

As tax practitioners and accounting firms navigate the evolving landscape of South African tax compliance, the advent of South African Revenue Service (SARS) auto assessments for individuals presents both challenges and opportunities. With SARS increasingly utilising data from various institutions to calculate individual tax assessments, practitioners must reassess their business models to stay ahead in this dynamic environment. Adapting to these changes is not just an option but a necessity for future survival in the South African tax and accounting practice industry.

What exactly is the SARS auto assessment?

The SARS auto assessment process involves SARS receiving data from employers, medical schemes, banks, retirement annuity funds, and other trusted sources to calculate an individual’s tax assessment. If the individual agrees with the assessment, they merely log into SARS eFiling of MobiApp and verify whether they’re due a refund or owe SARS money. If they disagree, they can amend their returns via eFiling or the SARS MobiApp.

The statistics from SARS’s recent annual reports clearly show the increasing prevalence of auto assessments. In the 2022/23 period, SARS achieved a staggering 94.7% success rate in auto-assessments for individuals, surpassing their target of 90%. This trend indicates a significant shift towards automation in tax assessment processes, signalling a fundamental change in managing tax compliance.

The rise of SARS auto assessments raises a crucial question for tax practitioners and accounting firms: Is your business model resilient enough? The traditional focus on individual tax returns may no longer be sufficient or viable in a world where automation is rapidly becoming the standard. However, within these challenges, there is a promising opportunity for a strategic shift towards managing the taxes of trusts and companies.

Why should tax practitioners pivot toward the management of taxes for trusts and companies?

Individual taxpayers may be more cost-sensitive when it comes to paying for tax requirement assistance. However, trusts and companies often have more complex tax requirements and are willing to invest in expert help to ensure tax compliance. Tax professionals specialising in trust and company tax services can tap into this less price-sensitive market segment while offering higher-value expertise tailored to their client’s needs.

As many high-net-worth individuals prioritise succession and generational wealth transition, the desire for founders or principals to ensure that much of their wealth passes on to the next generation effectively is of utmost importance. This generally involves trusts, private trust companies, and foundations offered in various jurisdictions. Succession and wealth transfer are complex issues and require a high level of expertise to ensure the transfer is carried out efficiently and seamlessly.

Professionals specialising in trust and company tax services are critical partners in helping clients achieve their financial objectives. With their extensive knowledge and expertise, they provide bespoke solutions tailored to each client’s unique needs. These services are especially valuable for high-net-worth individuals who require assistance in transferring their wealth while minimising tax liabilities and ensuring their intentions are executed as intended. As regulatory requirements continue to evolve and tax laws become more complex, the demand for trust and company tax services is expected to grow, especially as SARS continues to refine its automation processes. Trusts and companies will face increased scrutiny, driving a greater need for expert guidance to navigate these complexities.

Adapting to this shifting landscape requires a proactive approach. Tax practitioners and accounting firms should consider expanding their service offerings to include specialised trust and company tax services, leveraging their expertise to provide comprehensive compliance solutions for clients.

Additionally, investing in technology-driven solutions such as Konsise, a South African-built software platform designed to assist with tax compliance, can streamline workflows and enhance efficiency in managing trust and company tax obligations. By embracing technology and innovation, practitioners can position themselves as trusted advisors equipped to navigate the complexities of modern tax compliance effectively.

The path forward for tax practitioners with SARS auto assessments

In conclusion, the rise of SARS auto assessments for individuals signals a fundamental shift in the tax compliance landscape, prompting tax practitioners and accounting firms to reassess their business models. By pivoting towards specialised trust and company tax services, practitioners can capitalise on growing demand while offering high-value expertise tailored to their client’s needs. Embracing technology and innovation will be vital to staying ahead in this evolving landscape, ensuring sustainable growth and success in the dynamic world of tax compliance.

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