Under Section 222(1), taxpayers can face severe penalties for understatements in their tax assessments.<\/p>\n\n\n\n
These penalties can run up to 200% of the shortfall between what taxpayers declare and what a revised assessment concludes.<\/p>\n\n\n\n
However, these penalties can be avoided if the understatement was a “bona fide inadvertent error<\/em>.”<\/p>\n\n\n\n Unfortunately for taxpayers, while this has served as a vital lifeline for those who made genuine errors in their statements, the National Treasury’s “clarification” indicates that the runway has ended.<\/p>\n\n\n\n According to Tax Consulting SA, the “bona fide inadvertent error<\/em>” was a layer of protection for taxpayers who made innocent misstatements without the intention to deceive the taxman.<\/p>\n\n\n\n “On its face, that exemption applies to all understatement categories, whether a substantial understatement, negligence or gross negligence,” it said.<\/p>\n\n\n\n Under clause 21 of the 2025 Tax Administration Laws Amendment Bill (TALAB), this has now been “clarified” to show that this protection was only ever meant to be used in cases of substantial understatement.<\/p>\n\n\n\n This is a category triggered by an objective calculation<\/strong>, not taxpayer behaviour<\/strong>.<\/p>\n\n\n\n While the new draft laws do not delete or rewrite section 222(1), the National Treasury makes it clear that it views the wider use of the phrase as \u201ccontentious and adverse\u201d to a coherent penalty framework.<\/p>\n\n\n\n Making matters worse, the changes are coming in middle of tax filing season, where most errors are made, with hurried filings or practitioners managing complex tax affairs.<\/p>\n\n\n\n Where taxpayers can currently argue that any errors are honest mistakes, SARS will soon simply see them as negligence and impose penalties.<\/p>\n\n\n\n Tax Consulting said that the amendment bill is thus creating tension between the state (via NT and SARS) and taxpayers by not changing the actual laws, but rather relying on a clarifying memorandum.<\/p>\n\n\n\n On the one hand, the statute still has the broad language, and nothing in the written law confines its application to only one category (ie, “substantial understatements”).<\/p>\n\n\n\n On the other hand, any taxpayer who tries to use or argue for the exemption to apply will run straight into the clarification, which swings things in favour of SARS, especially in court.<\/p>\n\n\n\n “Even if the legal argument remains technically available, SARS will almost certainly reject it outside the substantial understatement category, forcing costly and uncertain litigation,” Tax Consulting said.<\/p>\n\n\n\n “For taxpayers, the practical effect of this amendment is grim.”<\/p>\n\n\n\n While taxpayers can try to argue their case or pursue the matter in court, penalties will accrue, interest will compound, and SARS\u2019s collection powers will march forward, the group said.<\/p>\n\n\n\n This could leave taxpayers with frozen bank accounts, attached assets, or debt collectors appointed without warning.<\/p>\n\n\n\n The tax experts said that the clarification isn’t really a clarfication but rather an attempt to close a loophole.<\/p>\n\n\n\n “Taxpayers who thought they had a wide safety net under section 222 of the TAA will find it rapidly cut away, leaving them exposed to penalties, SARS enforcement measures, and the risk of financial ruin,” it said.<\/p>\n\n\n\n “The safest path forward is brutal in its simplicity: file on time, file accurately the first time, and assume that every mistake, however honest, will be treated not as inadvertence but rather as understatement \u2013 with SARS penalties consequently being imposed.”<\/p>\n","protected":false},"excerpt":{"rendered":" The National Treasury\u2019s new Tax Amendment Bills make it clear that a lifeline that taxpayers have long relied on to avoid penalties from SARS is no longer the layer of protection it once was.<\/p>\n","protected":false},"author":10,"featured_media":780565,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[23631,3796,3246,2887],"class_list":["post-837826","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-errors","tag-national-treasury","tag-sars","tag-tax"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837826","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=837826"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837826\/revisions"}],"predecessor-version":[{"id":837829,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837826\/revisions\/837829"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/780565"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=837826"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=837826"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=837826"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Assume you will be punished<\/h2>\n\n\n\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2025\/04\/SARS-commissioner-Edward-Kieswetter-02.jpg\")
<\/a><\/figure>\n\n\n\n