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[FAQ] Documentation necessary to prove the base cost of an asset
- 05 July 2021
- Tax Administration
- The Tax Faculty Tax Specialist
This article is based on tax law for the year ending 28 February 2021.
Background
A taxpayer acquired assets a while ago however he does not possess invoices to prove the amount.
Are bank stamped bank statements sufficient enough to prove the base cost of an asset to SARS?
Answer
The Tax Administration Act
We accept that the assets in question were acquired on or after 1 October 2001.
The taxpayer will have a problem with regards to the amount, of the base cost, that can be ‘proved’. Before the introduction of the Tax Administration Act, section 73B of the Income Tax Act specifically dealt with “record keeping in relation to taxable capital gain or assessed capital loss”. This specific principle was included in the Tax Administration under the general record keeping sections. It is section 29 of the Tax Administration Act that requires of the person (taxpayer) to keep records that will enable the person to observe the requirements of a tax Act and enable SARS to be satisfied that the person has observed these requirements. The Act doesn’t deal with what is necessary to prove this – in other words, how these documents should look and what it should contain.
There is nothing that allows the taxpayer to use the fact that the documents were not retained as an excuse. It is relevant material and should have been kept, at least until the time of disposal, and thereafter until the return becomes final.
It is possible, as an alternative to consider the use of other sources, such as the entry in the deed office for the cost of acquiring the property (in respect of fixed property). The entry in a bank statement is, more often than not, merely prove of payment to a particular person and may not contain detail of the asset itself.
Webinar Commentary
Refer to the following webinar: Tax Administration 101 here.