The amendments at the end of 2025 affected section 222 of the Tax Administration Act 28 of 2011 (the TAA). The amendment moved the bona fide inadvertent error ground for relief from understatement penalties (USPs) to a different place in the USP regime. The practical effect of this amendment may be of concern when it comes to fixing errors made in tax returns. I discuss this possible concern in this article.

Correcting errors before the amendment

Before the amendment, section 222 provided that no understatement penalty (USP) could be imposed where the understatement resulted from a bona fide inadvertent error. Under the previous wording that meant no USP if the error being correct was a bona fide inadvertent error. The taxpayer did not need to go to the behaviour table in section 223. This outcome aligned with the request for correction (RFC) function to fix such errors on efiling. It also aligned with instances where the taxpayer lodged an objection to fix an error and SARS imposed no USP.

The amendment

In several cases over the few years, most pertinently in the Thistle and earlier Coronation judgments, the courts held that a taxpayer who took tax advice, acted on it and then faced a SARS disagreement with the position taken this would be a bona fide inadvertent error.

Amendments at the end of 2025 however altered sections 222 and 223. The timing of the amendment suggests to me that the cases informed the change. Section 222 now provides that a taxpayer must pay a USP if there is an understatement and one of the behaviours in the section 223 table is present. An understatement includes any prejudice to SARS or the fiscus that results from an incorrect statement. The definition draws no distinction as to why the statement was incorrect. An innocent error is therefore an understatement in the same way as any other.

The bona fide inadvertent error ground has not disappeared. It moved to section 223(3)(a), and it only applies where there is a substantial understatement. That is a defined term. It refers to instances where the prejudice to SARS or the fiscus exceeds the greater of 5% of the tax properly chargeable or R1 million.

The amended provisions, therefore, require that taxpayer pay a USP, determined at the highest applicable behaviour rate on the table for all understatements. There is no bona fide inadvertent error exception to rely on. By implication, an absence of any of these behaviours should result in no USP. For substantial understatements, an opinion from a tax practitioner under section 223 has always been the final defence for taxpayers not guilty of any other behaviours listed in section 223. The amendment introduced remittance in cases of a bona fide inadvertent error based on tax advice in those same circumstances.

What changed when correcting errors? 

A taxpayer can fix an error on a return that affects an issued assessment in a few ways. One involves using the request for correction function on efiling. As I understand, a correction made through that function does not attract a USP. If SARS audited or verified the assessment, the request for correction function is not available. The error must be corrected through an objection. Again, in my experience, these assessments generally do not include USPs.

If, for whatever reason, SARS (or its systems) were to, however, impose a USP, the taxpayer’s argument to oppose it becomes more difficult. The taxpayer can no longer rely on the bona fide inadvertent error ground from the onset. It must challenge the penalty on the behaviours in the table. For a true error, most of those behaviours should be relatively easy to dispose of. The taxpayer did not intend to evade tax, did not act grossly negligently, or take an unreasonable tax position. The behaviour that may be contentious is whether the taxpayer took reasonable care in completing the return. In my experience, this is a difficult one. The existence of the error already shows that something in the preparation process did not work as it should. Whether the care taken was reasonable then becomes a highly factual question, and I do not think it is a given that the taxpayer will come out successful. (A bona fide inadvertent error was also not a certainty, but on the facts of a taxpayer coming forward with the error, there was strong case for it).

If SARS, rather than the taxpayer, picks up the error and raises an assessment with a USP, even where it may be obvious that the error was an honest mistake, this likely accentuates the problem.

The unresolved question

I believe that the deeper question that this raises is what an error made despite reasonable care looks like. I think there is uncertainty on this point, and that uncertainty translates into USP exposure. Taxpayers must assess their USP risk and consider whether something else, such as a voluntary disclosure programme application with its own requirements and challenges, could counter that risk.

Take-home message

The law on bona fide inadvertent errors has changed. If an error exists, one cannot merely revert to the bona fide inadvertent error ground to oppose USPs. When correcting true errors, this may more thought about the USP risk they carry and about the ways in which that risk may need to be managed.