Taxpayer obligations are often perceived as burdensome, but they exist in a delicate balance against the powers and responsibilities of the South African Revenue Service (SARS). While SARS is tasked with administering tax laws, taxpayers must fulfill numerous obligations, one of the most fundamental being the responsibility to maintain records. This includes retaining these records for specific periods as prescribed by law.
According to Section 29 of the Tax Administration Act, 28 of 2011 (the Act), individuals and businesses are required to keep records, books of account, or other relevant documents that:
- Ensure compliance with the applicable tax legislation.
- Are required under specific tax Acts or by the Commissioner’s public notice.
- Allow SARS to verify that the individual or entity has adhered to the relevant tax regulations.
This obligation applies to anyone who has submitted or is required to submit a tax return for a given tax period. Crucially, these records must be kept for five years from the date the tax return is submitted. This means that, even if a tax return is filed late, the record-keeping period is tied to the actual submission date, and non-compliance will not negate this responsibility.
In cases where no tax return is required but a person has earned income, realized a capital gain or loss, or engaged in any taxable activity during the period, records must still be retained for five years following the end of the relevant tax year.
There are, however, some exceptions to this five-year rule, especially when it comes to capital gains or losses. For instance, when selling an asset that was held for several years, such as a home purchased in 2014 and sold ten years later, the burden of proof falls on the taxpayer to provide documentation that supports the base cost calculation. In this case, not only must the documents from 2014 be kept, but they also need to be retained for five years following the sale of the property, stretching the record retention period to a total of 15 years. This highlights the importance of managing and maintaining an effective record-keeping system, even if it’s not overly sophisticated—what matters most is accessibility and organization.
The complexity doesn’t end there. In cases where a person disputes an assessment, Section 32 of the Act outlines that any individual who has been notified of or is aware of an audit or investigation, or has lodged an objection or appeal, must retain the relevant records until the audit or investigation is concluded or the assessment or decision becomes final. Depending on the duration of the audit or appeal, this could mean that records need to be kept for much longer than the typical five years.
It’s clear that proper record-keeping is not just a bureaucratic obligation—it’s a necessity. If SARS requests supporting documentation and a taxpayer is unable to provide it, it can be highly detrimental to their case. Well-organised and easily accessible records significantly lighten the taxpayer’s burden while ensuring that they maintain full tax compliance.
So, while record-keeping may seem like an unnecessary hassle, its value becomes evident when dealing with audits, appeals, and capital gains over the long term. Developing a streamlined and efficient system can go a long way in minimising stress and ensuring peace of mind when it comes to taxes.
