In a tightening economy, the South African Revenue Service (SARS) is under increasing pressure to collect every cent it can. This effort is critical to shoring up the South African fiscus.
While many compliant businesses play by the rules, it is becoming clear that some large corporations are pushing the envelope too far. Some do so unintentionally, but others proceed with eyes wide open.
Cost-saving efforts, outdated practices or poor advice often drive these actions. However, some employers are taking liberties that will not withstand the scrutiny of a SARS audit. With SARS’ improved data matching, AI-powered risk profiling and a growing appetite for corporate audits, it is no longer a question of if. It is a matter of when they come knocking.
Payroll mistakes you cannot afford to ignore
In recent engagements, we have observed several recurring compliance missteps that employers continue to make, although sometimes unknowingly. SARS is intensifying its focus on employer-provided benefits and payroll disclosures.
Abuse of subsistence allowances, failure to tax company car fringe benefits and untaxed fuel cards are all examples of payroll mistakes that represent significant risk if not handled correctly.
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Fuel cards not being taxed
Fuel cards remain a widely used employee benefit. They are often provided either as a standalone offering or alongside a travel allowance. However, when these cards cover any personal use, such as fuel, maintenance, tyres or services for an employee’s privately owned vehicle, the full value or the portion related to personal use must be taxed through payroll as a fringe benefit.
Too often, companies overlook or deliberately ignore this requirement. This results in exposure to backdated PAYE liabilities, penalties and interest once audited.
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Abuse of subsistence allowances
Subsistence allowances are intended to reimburse modest, short-term expenses when employees travel on legitimate business. When employers use these allowances within SARS-determined thresholds, they can be non-taxable.
However, abuse continues to surface, especially in situations where:
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- All travel-related expenses (meals, accommodation, etc.) are already covered by the employer;
- A tax-free allowance is still paid; or
- Allowances are paid over extended, recurring periods, far beyond what SARS deems reasonable.
This behaviour triggers serious compliance issues. It raises red flags and increases the risk of an audit, with SARS often viewing it as an attempt to bypass legitimate taxation. These are avoidable payroll mistakes that can have serious financial consequences.
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Company cars not reflected on the payroll
When an employee receives a company vehicle, particularly one assigned for frequent or exclusive use, and uses it personally, even just for home-to-office travel, the appropriate fringe benefit must be taxed monthly via payroll.
Incorrect treatment, inconsistent declarations, or total omission of this benefit is a common audit trigger. This frequently leads to sizable SARS reassessments. Ignoring this requirement is one of the costliest payroll mistakes a company can make.
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Travel allowances assigned by grade or seniority
SARS has made it clear that employers can no longer assign generic travel allowances based on job grade or seniority.
Employers must demonstrate that:
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- The allowance is based on actual, expected business travel by the employee each month;
- A clear condition of employment requires the use of the employee’s private vehicle for business purposes; and
- A SARS-compliant logbook is maintained to justify the allowance.
Fixed travel allowances without supporting mileage data or a business rationale are highly likely to be disallowed. These allowances will be reclassified as fully taxable remuneration. To avoid this risk, employers must design proper travel allowance tools and ensure employees complete declarations to support payroll processing.
Tax non-compliance does not prescribe
Many employers mistakenly believe that non-compliance loses significance over time. They assume that if they have avoided scrutiny for a few years, the risk has passed. This belief is entirely false.
Tax defaults do not prescribe. SARS retains the authority to reassess historical tax periods indefinitely in cases involving fraud, misrepresentation, or non-disclosure. That invisible benefit you forgot to tax may return with penalties, interest and reputational harm.
The only way out – fixing payroll mistakes through VDP
If you identify, or even suspect, historical non-compliance in your payroll or benefits structures, the Voluntary Disclosure Programme (VDP) may be your lifeline.
Through the VDP, companies can:
- Make a clean, structured disclosure to SARS;
- Potentially secure remission or reduction of penalties; and
- Resolve historical exposure under a single tax type for all affected years.
However, timing is critical. Once SARS initiates an audit or contacts you regarding the issue, the VDP is no longer an option. Proactive disclosure remains your only protection.
Do not bury your head in the sand
Do not bury your head in the sandHoping SARS does not notice your non-compliance is a risky strategy that often backfires. The wiser approach is to partner with a qualified and experienced tax advisor. An expert can help you understand your full exposure and guide you through the clean-up process.
It is time to tighten the ship. The cost of inaction is simply too high. When SARS arrives, you want to be ready, not scrambling.
Tanya Tosen | Specialist | Tax & Remuneration | Tax Consulting SA | mail me |
