The days when SARS relied primarily on the information a taxpayer declared on an annual tax return are rapidly disappearing.
The South African Revenue Service (SARS) has invested heavily in artificial intelligence (AI), machine learning, data analytics and automated risk detection. Combined with an expanding supply of information received from third parties, these technologies are changing the way SARS identifies potential tax evasion and non-compliance.
For individual taxpayers, this raises an important question:
How much does SARS already know about your financial affairs before you submit your tax return?
The answer may be: considerably more than you think.
How Is SARS Using AI to Detect Tax Evasion?
SARS has been steadily building what it describes as a smart, modern and data-driven revenue authority.
Don’t rely on SARS to review your income tax return manually. SARS can use information from numerous sources to identify discrepancies, unusual patterns and potential compliance risks.
According to SARS, its risk-detection processes incorporate advanced data analytics, machine learning and artificial intelligence to identify situations where taxpayer submissions may be incomplete, absent, misrepresented or fraudulent.
The scale of this automation is significant. SARS reported that during the 2024/25 period, 100% of standard audit cases were created through automated risk evaluation.
This does not mean that an AI system automatically decides that somebody is guilty of tax evasion. It means technology is increasingly being used to identify those potential taxpayers. It also flags transactions presenting potential risks that may warrant further verification or investigation
What Information Does SARS Have About You?
This is where the system becomes particularly powerful.
SARS receives large amounts of third-party data—information supplied to SARS by organizations other than the taxpayer.
These sources include employers, banks, financial institutions, retirement funds, medical schemes and other entities. SARS has also identified information from sources such as the Companies and Intellectual Property Commission (CIPC). Even the Deeds Office and the National Register of Motor Vehicles has information SARS can tap in to within its data-driven risk environment.
Information available through third-party reporting can include employment income, interest earned, investment information, medical information, retirement contributions, donations, trust distributions and other financial information.
SARS also participates in international information-sharing arrangements relating to South Africans with offshore financial assets.
This means that the information declared on your tax return does not necessarily exist in isolation.
SARS can compare what you tell them with information it has received from elsewhere.
What Does This Mean for SARS Lifestyle Audits?
The term “lifestyle audit” is commonly used when discussing situations where someone’s apparent wealth or spending appears inconsistent with their declared income.
Consider a simplified example.
A taxpayer consistently declares relatively modest taxable income. At the same time, information available from various sources indicates ownership of valuable property, vehicles, investments or other assets that appear difficult to reconcile with that income.
That does not automatically mean tax evasion has occurred.
There could be perfectly legitimate explanations. The taxpayer may have received an inheritance, accumulated savings over many years, sold an asset, received a legitimate loan or transferred money between accounts.
The important issue is that the financial position should be explainable and supported by appropriate records.
As SARS becomes better at combining data from different sources, inconsistencies can potentially become easier for its risk-detection systems to identify.
SARS Already Knows a Lot Before You File
South Africans have already experienced one very visible consequence of SARS’s growing use of third-party information: Auto Assessments.
During the 2026 Filing Season, SARS expanded its use of Auto Assessments. We expect millions of taxpayers to be assessed using information already available to it.
SARS has also extended Auto Assessments to certain eligible provisional taxpayers. An important development because automated assessment is no longer confined entirely to taxpayers with the simplest tax affairs.
This demonstrates an important shift in tax administration.
The question is increasingly no longer simply:
“What information must I give SARS?”
A better question may be:
“What information does SARS already have about me, and does it agree with what I am declaring?”
A Mismatch Does Not Necessarily Mean Tax Evasion
This distinction is extremely important.
An inconsistency identified by an automated system does not automatically mean that a taxpayer has deliberately evaded tax.
Third-party information can sometimes be incomplete or incorrect. Transactions can also have legitimate explanations that may not be immediately apparent from the data itself.
The problem arises when taxpayers cannot adequately explain or substantiate their financial affairs when questions are raised.
That is why good tax compliance increasingly involves more than completing an ITR12 once a year.
Per-empting SARS Mismatches
At AGBS Financial, we believe that modern personal tax compliance should include looking at the taxpayer’s broader financial picture.
Where appropriate, this means considering the information likely to be available to SARS and comparing it with the information being used to prepare a client’s tax return.
For example, attention may need to be given to investment income, property transactions, company interests, trust distributions, offshore income or assets and other sources of funds that could affect the taxpayer’s position.
The objective is not to find ways around the tax system.
Quite the opposite.
The objective is to identify legitimate discrepancies before they become unnecessary problems.
Where something does not reconcile, it is generally preferable to investigate it while preparing the return. Don’t attempt to reconstruct the explanation after SARS has initiated a verification or audit.
Compliance Is Becoming Continuous
One of the biggest changes brought about by technology is that tax compliance is gradually becoming less of an annual event.
Third parties regularly provide information to SARS. Automated systems analyze data, and SARS continues to expand the amount of information available for ore-populating returns and identifying risk.
For taxpayers, proper record keeping is therefore increasingly important.
Documentation supporting loans, investments, asset disposals, inheritances, business transactions, trust distributions and other significant financial events should not only be considered when SARS asks for it.
It should form part of a taxpayer’s ongoing financial record keeping.
How AGBS Financial Can Help
At AGBS Financial, our approach is based on understanding the complete picture rather than simply capturing numbers into a tax return.
As an accountant in Milnerton assisting individuals and businesses throughout Cape Town and beyond, we help clients maintain their tax affairs. We also identify potential inconsistencies, understand their obligations and address compliance issues before they become larger problems.
Where legitimate differences exist between a taxpayer’s declared income and the broader information surrounding their financial affairs, having appropriate records and a clear explanation can become increasingly important.
SARS’s investment in AI and data analytics does not need to be feared by compliant taxpayers.
But it should be respected.
The more information SARS can obtain and analyze automatically, the less effective the old approach of treating a tax return as an isolated annual exercise becomes.
The future of tax compliance is increasingly data-driven. The best response is not to wait for SARS to find a mismatch—it is to make sure your tax affairs can withstand the comparison in the first place.
AGBS Financial assists individuals and businesses with tax compliance, tax planning, accounting and SARS-related matters. If you are uncertain whether your tax affairs accurately reflect your financial position, speak to us before a discrepancy becomes a problem.