Previously, if you understated your income, SARS was primarily concerned with why. If it was a genuine slip-up, or based on a genuine belief that you were entitled to adopt the tax position you did in the circumstances, an understatement penalty was not payable.
From 1 April 2026, that safeguard looks different. Here is what changed in sections 222 to 224 of the Tax Administration Act, 2011, and what it means when you hit “submit” on eFiling (or fail to do so).
What the old regime looked like
Under the Tax Administration Act, SARS can levy an understatement penalty of up to 200% depending on the “behaviour” resulting in the understatement: i.e. whether you made a “substantial understatement” as defined, failed to take reasonable care in completing your return, did not base your tax position adopted on reasonable grounds, were grossly negligent, partook in an impermissible avoidance arrangement” as defined, or intentionally evaded tax. The applicable percentage increases if your behaviour is considered obstructive or is a “repeat case” as defined, i.e. a second or further case of any of the behaviours within five years of the previous case.
The key safeguard was previously the exclusion contained in section 222(1). If the understatement resulted from a bona fide inadvertent error, an understatement penalty was not payable. In practice, taxpayers relied on this safeguard to block understatement penalties for honest mistakes, even when the understatement was large and regardless of any alleged behaviour on their part.
What changed
Under the Tax Administration Laws Amendment Act, 2026, the regime has been amended with effect from 1 April 2026. The core change is in how the bona fide inadvertent error exclusion operates.
It is no longer a blanket exclusion at the front end of the regime, contained in section 222(1). This means that SARS is no longer barred from imposing an understatement penalty in the first place where the understatement results from a bona fide inadvertent error. The exclusion has been moved.
It now exists only as a basis for remission of an otherwise validly imposed and payable understatement penalty in section 223(3), and only where that penalty relates to a “substantial understatement” as defined. A substantial understatement applies where SARS does not consider you blameworthy of any of the behavioural categories, but the prejudice to SARS is objectively significant. The objective threshold is the greater of 5% of the tax chargeable or R1 million.
Why did SARS do this
The explanatory memorandum on the objects of the Tax Administration Laws Amendment Bill, 2025, says the concept and scope of bona fide inadvertent error had become contentious and was undermining the clarity of the penalty regime. It explains that:
“The proposed amendment (as it then was) aims to clarify the scope and application of a bona fide inadvertent error by explicitly linking it with ‘substantial understatement’, which does not include a behavioural requirement (linked to taxpayer behaviour) but rather entails an objective calculation”.
What this means for you
The regime still escalates penalties based on behaviour: 25% for reasonable care not taken, up to 200% for obstructive or repeated intentional tax evasion. But the safeguard for innocent mistakes is narrower.
SARS is no longer primarily concerned with why you understated your income, but rather whether you are blameworthy of culpable behaviour in doing so, i.e. one of the behaviours. If SARS does not consider one of the behaviours to be present, i.e. the understatement is an innocent mistake, and the alleged prejudice crosses the objective threshold, you may still face an understatement penalty.
In this case, and now only in this case, may you claim remission of the penalty on the basis of an innocent mistake.
Significantly, with the exclusion for innocent mistake having moved from the front end of the regime to a basis for remission, the mistake will no longer be wiped clean as was previously the case, but will remain a “blemish” on your record – despite it being innocent, and despite SARS agreeing as much.
The effect is that if you make another innocent mistake in the five years that follow, the applicable penalty percentage will jump from the standard 10% to a punitive 20% for a repeat case.
The bottom line
While the 2026 amendments do not alter the penalty percentages, they have moved the safeguard, with the result that the relief afforded to you for an innocent mistake is far narrower.
The bottom line is simple: get it right the first time to avoid understatement penalties.
