SARS pre-populates your IRP6 with a "basic amount", drawn from your last finalised assessment. Accepting it feels like the safe, compliant option. It's safe if your year was flat or declining. It's an expensive trap if your business grew.
Provisional tax isn't a separate tax, it's a way of paying your annual liability in advance, twice a year: the first IRP6 due end of August, the second end of February. To make estimating easier, SARS fills in a basic amount drawn from your last assessed year, increased by 8% a year if that assessment is older than 18 months. Clicking accept requires no forecasting and gets waved through eFiling immediately, which is exactly why it's tempting.
Say last year's taxable income was R500,000, and this year a large new contract puts you on track for R1,200,000. Accept the R500,000 basic amount on both IRP6 returns and your advance payments run drastically below what you'll actually owe. You'll feel flush with cash flow all year, genuinely believing you're compliant because the returns were filed on time. The trap springs at your annual assessment, when SARS calculates tax on the real R1,200,000 and the shortfall lands as a single, immediate bill.
If your taxable income is under R1 million, your estimate needs to be at least the basic amount or 90% of your actual final income to stay protected. Above R1 million, the basic amount safe harbour disappears entirely, and your estimate must be at least 80% of actual. Miss that threshold and SARS can levy an underestimation penalty of up to 20% on the shortfall, on top of a 10% late payment penalty if you don't settle quickly, and interest on the underpaid amount running at roughly 11.5% to 11.75%. Between the shortfall itself, the penalty and the interest, a business that grew and simply accepted last year's number can end up funding a genuinely painful lump sum.
The fix isn't more caution, it's better data. By August you should have five to six months of actual trading behind you, enough to project the year with real confidence. By February you have eleven months of data, and the second estimate should be close to exact. If your income includes capital gains from an asset sale, or a salary alongside business income, factor both in before you submit, not after.
Pull year-to-date management accounts before each IRP6. Five to six months of real trading data beats a historical basic amount every time.
Check which threshold applies to you. Above R1 million taxable income, the basic amount offers no protection at all.
Adjust downward if the year genuinely weakened. SARS allows a lower estimate provided you can support it with current figures if asked.
Consider a voluntary top-up payment. Made after February but before your final assessment, it stops interest accumulating on any shortfall you've already identified.
Yes, if your income has genuinely dropped, though SARS may ask for supporting management accounts to justify the lower figure.
No. Above R1 million in taxable income, you're required to estimate within 80% of your actual final figure regardless of what the basic amount shows.
An optional third payment, usually around September, that lets you settle an identified shortfall voluntarily and stop further interest from accumulating on it.
The basic amount is an administrative convenience, not a substitute for knowing your own numbers. If your business grew this year, check your actual year-to-date figures before you accept it on your next IRP6. For related tax guidance, see our blog, and current SARS information.
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