SARS lifestyle audits

When it comes to tracking down tax-dodgers, SARS has the tools, the people, and the will

- STEVEN JONES

TAX EVASION and illicit financial flows are two areas that have long undermined economic growth in South Africa, and public trust in governance. To counter these challenges, SARS has increasingly leaned on a controversial but effective tool—the lifestyle audit.

These audits, designed to reconcile an individual’s or entity's declared income with their actual standard of living, have become a prominent feature of SARS' efforts to improve tax compliance and clamp down on corruption.

What are lifestyle audits?

A lifestyle audit is an investigative process used by SARS to determine whether a taxpayer's declared income matches their visible lifestyle.

If an individual appears to be living beyond their declared means—e.g. owning luxury vehicles, high-end properties, or funding extravagant travel—SARS may initiate a lifestyle audit to examine possible discrepancies.

The purpose is not solely to detect underreporting of income, but also to identify undeclared revenue streams. These include money from illegal activities, tax fraud, or non-disclosed offshore income.

Legal framework & SARS mandate

SARS derives its authority to conduct lifestyle audits from various legislative instruments, most notably:

• The Tax Administration Act (TAA) 2011, which allows SARS to gather information for verification or audit purposes;

• The Income Tax Act 1962, and Value-Added Tax Act 1991, both of which empower SARS to assess compliance with tax obligations; and

• The Financial Intelligence Centre Act (FICA) 2001, providing tools to trace illicit financial activity.