JHB 
Recent amendments to South Africa’s Tax Administration Act have materially strengthened SARS’s ability to impose understatement penalties on taxpayers. The changes, which came into effect on 1 April 2026, significantly narrow the scope of the bona fide inadvertent error defence that taxpayers previously relied upon to avoid penalties in certain circumstances.
The amendment reflects a broader shift in the South African tax environment toward stricter enforcement, heightened accountability, and increasingly aggressive compliance oversight.
Understatement penalties remain severe
From 10% to 150% in standard cases
From 20% to 200% in obstructive or repeat cases
These penalties are separate from any tax liability, interest, or other administrative consequences that may also arise. SARS continues to use penalties not only as an enforcement mechanism, but increasingly as a revenue collection tool.
The bona fide inadvertent error defence has changed
Before 1 April 2026, taxpayers could argue that an understatement resulted from a bona fide inadvertent error. Where this defence applied successfully, the matter could fall outside the understatement penalty regime altogether. This created an important protection for taxpayers where errors occurred despite an absence of intentional misconduct or negligence. However, SARS increasingly viewed this defence as too broad and inconsistent with a stricter enforcement framework.
SARS now tests taxpayer behaviour first
Failure to take reasonable care
No reasonable grounds for the tax position adopted
Gross negligence
Intentional tax evasion
Substantial understatement
Substantial understatements remain particularly risky
The legislation also reinforces SARS’s position regarding substantial understatements. A substantial understatement generally arises where the prejudice to the fiscus exceeds the greater of:
R1 million, or
5% of the tax chargeable or refundable
Even where taxpayers successfully dispute allegations of negligence or lack of proper care, they may still face penalties if the understatement exceeds these thresholds. This creates a far narrower pathway for avoiding penalties than existed previously.
Independent tax opinions are becoming increasingly important
The amendments place growing importance on obtaining properly structured independent tax opinions where complex tax positions are involved.
To potentially qualify for relief:
Full disclosure of the relevant arrangement must be made by the tax return due date
An independent registered tax practitioner must issue a supporting opinion by the same deadline
The opinion must conclude that the taxpayer’s position is more likely than not to succeed if challenged in court
Importantly, these opinions must exist when the return is submitted, not only once SARS initiates an audit or dispute. This creates significant timing and disclosure obligations for taxpayers.
The compliance environment is becoming increasingly unforgiving
The repositioning of the bona fide inadvertent error defence reflects SARS’s broader movement toward stricter and more data driven enforcement. Taxpayers can no longer assume that genuine mistakes will automatically shield them from penalties. Strong record keeping, proper documentation, professional oversight, and careful tax governance are becoming increasingly important in managing tax risk.
This is particularly relevant for:
Complex transactions
Corporate restructures
Trusts and high net worth taxpayers
Cross border transactions
Aggressive tax positions
Significant deductions or allowances
Professional guidance is more important than ever
As SARS continues tightening its enforcement framework, taxpayers should ensure that tax positions are carefully assessed before submission.
At MMS Group, we assist individuals, trusts, and businesses with professional tax compliance, advisory, and governance services designed to help clients minimise risk, strengthen defensibility, and navigate the increasingly complex regulatory environment with confidence. Reach out here to connect with our team.