Bank deposits in a SARS assessment

Reconciling bank deposits before disputing an assessment

28 October 2026
Tax Dispute Resolution
Dr Stiaan Klue

Source: TaxCafe, Carmen Westermeyer CA(SA), October 2026. Available on Webinar-on-Demand: TaxCafe with Carmen Westermeyer - October 2026

At a glance

Bank credit	Possible character	Evidence required
Customer payment	Trading receipt or settlement of a debtor	Invoice and ledger
Transfer between own accounts	Movement of existing funds	Matching debit and account ownership
Loan advance	Repayable funding	Agreement, source and repayment evidence
Gift or family support	Potential non-revenue receipt	Donor evidence and transaction context
Asset-sale proceeds	Capital or revenue transaction	Sale agreement, asset history and tax calculation

Total bank credits are not synonymous with taxable income. They may include transfers, loans, capital proceeds and amounts held for others. But a taxpayer who asserts those explanations must support them with evidence that can be traced to the individual transactions.

A useful response to the South African Revenue Service (SARS) explains each material difference between bank credits and the return. The reconciliation should identify the legal character of the receipts and support the alternative computation. The assessment and any understatement penalty then require their respective statutory tests.

Explain every material difference without double counting

Begin with complete bank data for the relevant accounts and periods. Identify transfers between accounts before aggregating receipts, and preserve the matching entries. Reconcile the remaining credits to invoices, debtor settlements, payroll, investment statements, funding and asset disposals.

The definition of gross income in section 1 of the Income Tax Act 58 of 1962 remains the substantive enquiry. A bank entry is evidence of a receipt, but its legal character and the taxpayer’s entitlement to it must be established. A loan requires a genuine repayment obligation; describing a deposit as “capital” does not prove one.

Illustrative reconciliation. A taxpayer has R900 000 of bank credits. Supported records identify R250 000 of transfers from another owned account, R100 000 of genuine loan advances and R150 000 of proceeds from an identified asset sale. The remaining R400 000 comprises customer receipts. This does not establish taxable income of R400 000: accruals, deductions and the asset-sale consequences still require analysis. It does establish why the R900 000 total cannot simply be treated as business revenue.

Client conversation trigger: Ask clients with mixed personal and business accounts to classify credits monthly and retain evidence for loans, gifts and transfers when they occur.

Apply the burden of proof provisions accurately

Section 102(1) of the Tax Administration Act 28 of 2011 places specified burdens on the taxpayer, including proof that an amount is exempt or otherwise not taxable and that a deduction is allowable. It should not be described as a statutory presumption that every unexplained deposit is income. Section 102(2) separately places on SARS the burden concerning the reasonableness of an estimated assessment and the facts supporting an understatement penalty.

Where SARS estimates under section 95, engage with the factual basis and methodology. Identify duplicated transfers, amounts belonging to another taxpayer, incorrect periods and unsupported assumptions. Then provide a supported alternative computation. Attacking the estimate in general terms while withholding the underlying records is unlikely to resolve the dispute.

Proposition	Accurate treatment
All bank deposits are taxable	Incorrect as a universal rule; character and entitlement matter
The taxpayer need only deny income	Insufficient where the statutory burden requires proof
An estimate is beyond challenge	Incorrect; its basis and reasonableness can be examined
A penalty follows automatically from any difference	Incorrect; the statutory penalty requirements must be established

Client conversation trigger: Where SARS relies on bank totals, prepare a transaction-level alternative and separate the assessment dispute from the penalty dispute.

Apply the procedural and evidential lessons from Ntayiya

In Ntayiya v South African Revenue Service (848/2023) [2025] ZASCA 183 (1 December 2025), the taxpayer had filed nil returns for six years. The R3.6 million figure was an assessed liability inclusive of interest and penalties, not a finding that bank deposits themselves totalled R3.6 million. The appeal concerned a repayment claim of R762 335.08 and included important procedural difficulties: the attack on the assessments had been abandoned, and the taxpayer conflated his position with that of his separate company.

The court also found the uncorroborated accountant-error explanation inadequate on the facts. The judgment does not establish automatic, absolute liability for every adviser’s mistake. For practitioners, the decision reinforces the need to substantiate the explanation, identify the correct taxpayer and preserve the appropriate challenge. Judgment, paragraphs 2–5, 14–21 and 24–28.

The working file should therefore contain the taxpayer’s approval, the information supplied to the adviser and any explanation of an error. If reliance on advice becomes relevant, the advice and the facts disclosed to the adviser should be available. A later assertion that “the accountant handled everything” does not reconstruct the missing record.

Client conversation trigger: Before submitting a nil return, reconcile it to bank activity and obtain informed client approval, especially where the client owns or controls a separate business entity.

Practitioner action checklist

#	Area	Issue	Clients affected	Action required	Timing
1	Credits	Mixed receipt categories	Mixed-account users	Reconcile each material credit	Monthly
2	Evidence	Loans and gifts	Funded individuals	Obtain contemporaneous support	On receipt
3	Dispute	Estimated assessment	Selected taxpayers	Present supported alternative	Within response period
4	Penalty	Separate statutory enquiry	Understatement cases	Address behaviour and proof	With dispute
5	Approval	Nil returns and entity confusion	Business owners	Reconcile and confirm taxpayer	Before filing

Build the assessment response around a transaction-level reconciliation supported by source records. Address any penalty separately, with the facts relevant to its statutory requirements.

Frequently asked questions

Can SARS treat all bank deposits as taxable income?

Total bank credits are not synonymous with taxable income. They may include transfers, loans, capital proceeds and amounts held for others, but each explanation must be supported by evidence.

How do I prove a deposit was a loan?

A loan requires a genuine repayment obligation, and describing a deposit as capital does not prove one. Trace it to source records.

Should an understatement penalty be disputed separately?

Yes. The assessment and any understatement penalty require their respective statutory tests, so address the penalty with the facts relevant to it.

Build your expertise: to apply these principles in practice, explore The Tax Faculty’s SARS Dispute Resolution: A Focus on Objections and Appeals webinar on demand.

About the author

Dr Stiaan Klue is Executive Dean and CEO of The Tax Faculty. He was the founding CEO of the South African Institute of Taxation (SAIT) and is the founding author of Silke on Tax Administration (LexisNexis).

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