What are my options if I can’t afford my tax bill?

Published on 28th June, 2023 at 04:01 pm

With tax season around the corner, it’s time to think about how much you might owe SARS – and how you’ll pay.

Reading time: 4 minutes 

In this article you’ll learn:

• The importance of filing your tax return on time.
• How to remain compliant.
• What steps to take if you can’t afford your bill.

Tax season often fills people with panic. While you might be tempted to bury your head in the sand, filing your tax return is a legal obligation. Penalties and potential criminal liability aside, not filing on time can have a knock-on effect on other parts of your life.

“If you’re looking to secure a home loan, you need to show proof of your tax compliance status to the bank,” explains Nicci Courtney-Clarke, COO and Head of Tax at TaxTim. “You’ll only be able to obtain this if all your returns are up to date and filed appropriately.” Looking ahead, being non-tax compliant can affect your retirement, making it hard to access these funds when you need them.

SARS has become stricter in recent years by levying administrative penalties for missing the tax filing deadline. This means it’s more important than ever to file your tax return on time. “SARS used to give a period of grace before levying penalties, but now filing even a day late will have a financial impact,” says Courtney-Clarke.

Use this free income tax calculator to calculate the tax deductions you will pay for the current tax year.

What if you can’t afford the bill?

For some, paying in full is financially impossible, but there are ways to mitigate the liability. The first step, says Courtney-Clarke, is to check that the amount owed is correct. If there is an error, for instance, expenses have been overlooked, you’ll need to file a dispute with SARS via e-filing. The process can take up to 60 business days and you might need to upload supporting documents.

If you’re liable for the total amount, however, you might qualify to enter into a payment arrangement, which allows you to settle your debt in instalments. You can do this if:

• There’s a lack of assets or liquidity, which is reasonably certain to be remedied in the future
• You expect income or other receipts that can be used to satisfy the tax debt
• Prospects of immediate collection activity are poor or uneconomical but are likely to improve in the future
• Collection activity would be harsh in the particular case and the deferral or instalment agreement is unlikely to prejudice tax collection
• You provide the security as may be needed
• All outstanding returns and/or recons are submitted

What happens if you have multiple income sources?

Some taxpayers are hit with a hefty bill if they generate income from multiple sources. Remember, you’re taxed on your total income and tax is calculated on a sliding scale – the more you earn, the more you’re taxed. To avoid a nasty surprise come tax season, Courtney-Clarke recommends speaking with one or more of your employers or income sources and requesting a portion of your earnings be withheld for tax.

If you earn an income in addition to your salary, she recommends you register as a provisional taxpayer (note, there are some exceptions and thresholds that apply). “If you earn additional taxable income from a rental property [above R30 000 per tax year] or do freelance work, for example, then you should register as a provisional taxpayer and pay tax in two instalments to SARS. If you don’t do this, you’ll be hit with one tax bill as well as potential penalties.”

Regardless of your tax profile, keeping up with your payments will help you avoid both financial and administrative challenges down the line, says Courtney-Clarke. “We’re seeing many situations where SARS requests old tax returns from taxpayers, often dating back years. This can take time and money to resolve. If you file your tax return every year and have an unbroken filing history with SARS, you’ll avoid this issue.”

With Sanlam Reality, you get free access to TaxTim an easy-to-use online tool that can help you do your income tax returns.