Experts warn borrowing against expected tax refunds could leave households facing even greater financial pressure if refunds are reduced or delayed. They said relying on expected refunds before they are paid could fuel over-indebtedness and create unnecessary financial hardship.

The tax season officially began on Wednesday, 1 July, with Sars auto-assessments. Taxpayers who were not auto-assessed were urged to submit their tax returns from Monday (13/7) until Friday, 23 October, while provisional taxpayers have until next year to file.

The National Debt Advisors said financially strained middle-to-high income earners have increasingly turned to short-term credit in anticipation of receiving tax refunds from Sars.

However, the organisation cautioned refunds are not guaranteed and may be reduced or delayed due to outstanding tax debt, penalties, interest, verification processes or withdrawals under the two-pot retirement system.

“Many taxpayers make the mistake of budgeting for the amount reflected in their expected Sars refund before deductions have been made,” said National Debt Advisors debt counsellor Sharon Mmitsi. “Outstanding tax, penalties or other liabilities can reduce the final amount paid, leaving people short of the money they were counting on.

“We are seeing consumers borrow money to cover household expenses or purchases because they expect a tax refund. When the actual payment is lower than anticipated, they are left struggling to repay debt they never should have taken on in the first place.

“Before making any financial plans, taxpayers should first request a statement of account and check for outstanding returns, penalties, interest or tax debt that could affect their refund. Knowing your actual financial position is essential.”

Tax specialists have also advised taxpayers to carefully review their auto-assessments before accepting them. Those who disagree with the assessment may dispute it and submit a manual return instead.

‘The safest approach is to wait until the refund has been deposited’

The organisation stressed not every taxpayer is required to submit a tax return, and even those who do file will not necessarily receive a refund. Depending on individual tax circumstances, some taxpayers may receive no refund at all, while others could owe Sars additional tax.

“The safest approach is to wait until the refund has been deposited into your bank account before making spending decisions,” said Mmitsi. “Plan with the money you have, not with money you hope to receive.”

OFM News/Zenande Mpame sm

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