SARS Audit Guide: What to Expect and How to Prepare

Receiving a SARS audit letter can be stressful, but it does not necessarily mean you have done something wrong. SARS selects returns for verification and audit for many reasons. This guide explains the process, your rights, and how to prepare.

Verification vs. Audit: What Is the Difference?

SARS uses two types of review:

• Verification — A desk-based review of specific items on your return. SARS asks for supporting documents (invoices, receipts, bank statements) to confirm what you declared. Less invasive, usually resolved within 3-6 weeks.
• Audit — A comprehensive review of your tax affairs. May involve on-site visits, interviews with staff, and detailed examination of your accounting records and systems. More thorough, can take 3-12 months.

Common Triggers for SARS Audits

• Industry benchmarking — Your income or expenses are significantly different from similar businesses in your industry
• Large or frequent VAT refunds — Consistent refund claims trigger automatic review
• Third-party data mismatches — Declared income does not match data from banks, medical schemes, employers, or other sources
• Prior non-compliance — Late returns, late payments, or previous audit findings increase your risk
• Unusual transactions — Large once-off transactions, related-party dealings, or offshore transfers
• Industry focus — SARS targets specific sectors periodically (e.g. construction, property, trade)
• Random selection — Some returns are randomly selected for verification

The SARS Audit Process

Stage 1: Notification Letter

You will receive a formal letter from SARS (via eFiling or post) notifying you that your tax return has been selected for verification or audit. The letter will specify:

• The tax type and period under review
• The specific items being reviewed
• The documents you need to provide
• The deadline for submission (typically 14-21 days)
• The SARS auditor's contact details

Stage 2: Document Submission

You will need to provide the requested documents. Common requests include:

• Bank statements for the period under review
• Tax invoices for sales and purchases
• Financial statements and trial balances
• Asset register and depreciation schedules
• Payroll records and EMP201/EMP501 returns
• Share register and ownership documents (for B-BBEE related reviews)

Stage 3: SARS Review

SARS reviews the documents and compares them against your returns. They may:

• Accept your returns and close the audit (no change)
• Request additional information or clarification
• Schedule a meeting or on-site visit
• Issue a letter of audit findings if they identify adjustments

Stage 4: Audit Findings and Outcome

If SARS identifies adjustments, they will issue a letter of findings explaining the proposed changes. You have the right to respond. Possible outcomes:

• No adjustment — Audit closed, no change to your returns
• Additional assessment — You owe more tax, plus penalties and interest
• Reduced assessment — Rare, but SARS may find you overpaid

Stage 5: Dispute Resolution (If Needed)

If you disagree with SARS's findings, you can follow the dispute process:

• File an objection within 30 business days of the assessment
• Provide supporting documents and legal argument
• SARS considers the objection and issues a decision
• If unsuccessful, you can appeal to the tax board or tax court

How to Prepare for a SARS Audit

• Respond promptly — Meet all deadlines. Ignoring SARS letters escalates the matter.
• Appoint a tax practitioner — An experienced accountant or tax practitioner handles correspondence, prepares responses, and represents you.
• Gather documents systematically — Organise invoices, bank statements, and contracts by month and category.
• Review your returns — Identify any areas where your documentation may not fully support what you declared.
• Do not destroy records — You must keep records for 5 years. Destroying records during an audit is a criminal offence.
• Be honest — If you made a mistake, it is better to correct it voluntarily than to have SARS discover it.

Your Rights During a SARS Audit

• To be treated professionally, courteously, and fairly
• To be informed in writing of the scope and purpose of the audit
• To be represented by a tax practitioner or legal advisor
• To reasonable time to prepare and submit requested documents
• To confidentiality of your tax information
• To be notified of findings before any assessment is issued
• To object and appeal against audit findings
• To request that the audit be transferred to a different SARS office if there is a conflict

Penalties for Audit Adjustments

How to Avoid an Audit

• File all returns on time — every time
• Declare all income accurately — SARS matches data from banks and third parties
• Keep proper records — if selected for verification, good records resolve it quickly
• Align with industry norms — if your income or expenses are outliers, expect a query
• Seek professional advice for complex transactions
• Respond to SARS queries immediately — unresolved flags increase audit risk