SARS Audit Penalties: What Happens If SARS Audits You

Types of SARS Audits

Not all SARS audits are the same. The type of audit affects the penalties you may face:

• Verification — SARS requests supporting documents for specific items on your return (e.g., medical expenses, travel claims). This is the most common and least severe.
• Desk audit — a more detailed review of your return, typically triggered by automated risk scoring.
• Full audit — a comprehensive examination of your tax affairs for one or more tax years. May include visits to your premises.
• Criminal investigation — reserved for cases of suspected deliberate fraud or evasion. This is the most serious and may result in criminal prosecution.

What Penalties Can Result from an Audit?

If a SARS audit reveals that you understated your tax liability, the following penalties can apply:

In addition to understatement penalties, SARS will charge interest on any additional tax assessed from the original due date.

How Audit Findings Affect Penalty Classification

The penalty rate depends on SARS's assessment of your behaviour — not just the size of the understatement. This is often the most contested part of an audit outcome.

• Substantial understatement — the lowest penalty, based purely on the size of the shortfall relative to total tax. No negative intent required.
• Reasonable care not taken — you made a mistake that a reasonable person would not have made. Still relatively low penalty.
• Gross negligence — you showed a reckless disregard for your tax obligations. SARS must prove this.
• Intentional evasion — you deliberately acted to evade tax. SARS must prove intent.

Your Rights During an Audit

• Right to representation — you can appoint a tax practitioner to represent you
• Right to reasons — SARS must tell you why you were selected for audit
• Right to challenge — you can dispute the behaviour classification and penalty through objection (Section 104)
• Right to privacy — SARS must follow lawful procedures when requesting information
• Right to confidentiality — audit details are confidential between you and SARS

Is the VDP Still Available During an Audit?

Generally, no. The Voluntary Disclosure Programme requires that the disclosure be "voluntary" — meaning it must not be prompted by a SARS audit or investigation. Once SARS has notified you of an audit, the VDP is typically no longer available for the tax periods under audit.

This is why timing is critical. If you know you have undeclared income or incorrect returns, applying for the VDP before SARS initiates an audit can save you significant money. Use our Understatement Penalty Calculator to see the difference.