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JIMMY MOYAHA: It’s Personal Finance time. On this particular Monday, we’re going to be taking a look at something called a tax diagnostic report. We are coming to the end of the tax season and it is slowly starting to wrap up. At some point it will wrap up but, ahead of that, we thought why not take a look at some of the interesting data that you are able to cover from a tax diagnostic report – and how it can help you better prepare for your taxes.
I’m joined on the line by the Sars Compliance Specialist at Tax Consulting SA, Alex Mahundla, to take a look at this and see what we make of it. Alex, thanks so much for taking the time. What is a tax diagnostic report?
ALEX MAHUNDLA: Thanks, Jimmy for the invite. A diagnostic report obviously is based on your Sars record. To simplify, it is a Sars health check on your Sars profile, which is conducted by looking at an overall compliance of your Sars matters – which may be very helpful for an expat who left South Africa a long time ago or is planning to leave.
JIMMY MOYAHA: Alex, let’s take a look at just what is covered in here. You say it’s quite a comprehensive report and it covers a couple of aspects of what Sars might be looking at from you, or what you might be looking at engaging with Sars on.
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What are the specifics that we can look at – if we can look at perhaps three or four things that are included in this report?
ALEX MAHUNDLA: Yes. Maybe to name a few, one that might be worrying much is if you can see that when you’re filing your tax return as of the 2025 tax season, you need to state whether you are filing as a resident or a ‘non-tax resident’. So, one of the things that we check there when we are conducting the report is whether you are a resident of South Africa or a non-tax resident of SA.
During that process, we also check whether there are any outstanding tax liabilities; or it may be a positive thing to also check that maybe there are refunds on your Sars profile.
JIMMY MOYAHA: Now, Alex, some people out there have very complex tax matters; some people have multiple income streams, some people might have business interests, some people might even have offshore and cross-border tax exposure through foreign investments. Does the report kind of help with that? Can we navigate those complexities within understanding the report? I suppose having the conversation with a tax practitioner is always part of that, but can we start to address these issues as well?
ALEX MAHUNDLA: Yes, because what we also do there is to check your historical filing of the tax returns, meaning [whether] you have someone [helping you] or you are filing the tax returns on your own.
We then check and recommend the next step, which is to ensure that however you were filing, was it the correct way? If there are any corrections that need to be made, we then recommend you to a tax professional.
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To give you an example, you might find that you are filing as a resident, [whereas] your Sars record shows that you are a non-tax resident and for those years you may have been paying taxes in South Africa. So, with the report you then find yourself in a better situation to understand your tax matters better.
JIMMY MOYAHA: Now, Alex, you brought up the ‘tax professional’. Of course, for those listening to this, this isn’t a financial advice conversation. This show does not give financial advice. That’s why it is important to seek out the advice of tax professionals, such as Alex and those who are out there before you have these conversations.
Alex, I want to take a look at the cost side of it. A lot of people might think that this is an expensive exercise and you might worry about whether or not you can afford the diagnostics report and the findings – planning around the findings and all sorts of things around that. Is this something that becomes a costly and cumbersome thing to do, understanding that, of course, nobody wants to be on the wrong side of the Receiver of Revenue in any event? But is this an expensive thing to do?
ALEX MAHUNDLA: It’s not an expensive thing to do. But, obviously, taxpayers also need to know that it gives you peace of mind, because in fact you need to know where you actually stand with Sars so that you can better understand your tax situation.
I will give you an example. For someone who left a long time ago – perhaps an expat who left, say, in 2022 – and has not actually engaged with Sars in a long time, it might be that your contact details are outdated. This report comes to say that okay, this is where you actually stand with Sars; if there are any matters that need to be addressed, we then pick them up during the tax diagnostic process.
So its quite a reasonable process to go through at a reasonable price.
JIMMY MOYAHA: Alex, what if I am a tax resident in South Africa? I live in South Africa. I just happen to have things that happen outside of South Africa in the form of those multiple income streams we touched on earlier, but I’m not looking to emigrate from South Africa – can I still use this kind of report?
ALEX MAHUNDLA: You can still do that because some South African tax residents don’t even know where they stand with Sars. They’ve never actually looked at their tax matters from a professional side. So if you engage a text professional to say, okay, I have a concern in terms of where I stand with Sars; I don’t actually know what is happening on my profile.
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You then engage with a tax professional to have a look at your tax matters to ensure that everything is in order, because it’s quite important that you approach your Sars tax matters before Sars approaches you, because that’s where things go [south] or rather don’t go smoothly – if you don’t check your tax before Sars comes after you.
JIMMY MOYAHA: Now, Alex, as we wrap up, when you say it’s important that you get ahead of these conversations before Sars comes after you for that, can we go through perhaps a high-level overview of some of the benefits of getting ahead of this, and perhaps even some of the implications if Sars is to be the one to make the first move and you are caught on the back foot.
ALEX MAHUNDLA: Yes. Based on my experience working with clients, we often note that okay, Sars then may raise a penalty on your Sars profile. Or rather, maybe there’s a tax liability on your Sars profile.
If you have issues like your contact details are outdated, you will not be receiving that communication from Sars because you are not even aware what’s actually happening on your Sars profile. So they will then charge penalties on that tax liability. You will often find that they sent letters of demand and final letters of demand, which then may have the consequence that you find [penalties] deducted from your account directly by Sars.
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JIMMY MOYAHA: The last thing you want to do is find yourself on the wrong end of the South African Revenue Service. Perhaps a tax diagnostic report is just what you need to get ahead of your tax affairs or get your tax affairs in order. But again, folks, this is a conversation for you to have with your tax practitioner and ask for financial advice. Don’t say that this show gave you financial advice.
We’ll leave the conversation on that note. Thank you so much to Alex for those insights and for the time. Alex Mahundla, a Sars specialist at Tax Consulting SA, joined us to take a look at a Tax Diagnostics Report.
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