Have you been living the life on social media and not telling Sars? Gone on overseas trips to exotic destinations? Purchased new cars, houses, expensive brand clothes, watches, jewellery etc.? The latest legislative change spans at least 14 new government departments who can conduct lifestyle audits. This is coupled with mandatory information-sharing across a wide range of state entities, including Sars. This rings alarm bells for many affluent South African individuals with unexplained wealth, as they will be reported, not only to the taxman, but also prosecuting authorities.

Among the most notable changes in the draft General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, published on 14 January 2026 with public comments due by 13 February 2026, is granting of statutory power to the Financial Intelligence Centre (FIC) to conduct lifestyle audits.

The draft Bill defines a lifestyle audit as “an audit to determine if a person’s living standards are consistent with the income from legitimate sources that can be attributed to that person”.

Once unexplained wealth is identified and reported to Sars, the downstream risks escalate quickly. These include potentially significant additional tax assessments, understatement penalties of up to 200% of the tax outstanding, and even criminal prosecution. The only way to avoid this is by making use of Sars’ Voluntary Disclosure Programme (VDP), which guarantees waiver of all penalties (except in instances of gross negligence or intentional tax evasion) and amnesty from criminal prosecution by the Commissioner of Sars. 

Big Brother is Watching

The FIC, mandated to assist in identifying the proceeds of crime and safeguarding the country’s financial system, is also obligated to share the information it collects with numerous bodies, outlined in the draft Bill: 

“The other objectives of the Centre are to facilitate the administration and enforcement of the laws of the Republic by making information it collects and produces available to

(i)              an investigating authority; 

(ii)             the National Prosecuting Authority; 

(iii)            an intelligence service; 

(iv)            the South African Revenue Service;

(v)             the Independent Police Investigative Directorate;

(vi)            the Intelligence Division of the National Defence Force; 

(vii)           a Special Investigating Unit;

(viii)           the office of the Public Protector;

(ix)            an investigative division a national department;

(x)             a supervisory body;

(xi)            the investigative division of the Auditor-General; 

(xii)           the Border Management Authority; or 

(xiii)          the Public Procurement Office;”

This means that detecting tax non-compliance will not remain within Sars’ ambit alone. The tax authority may now effectively have a broad range of state bodies reporting potential non-compliance to it. On the strength of information received from the FIC, all these organs of state can come after you, triggering Sars scrutiny.

The Draft Bill is clear that the FIC can conduct lifestyle audits on persons prescribed by the Minister at the request of an organ of state, public entity or municipality, if it reasonably believes the entity is affected by or has an interest in the information it obtains through conducting such an audit. With this widening of powers, the wolf is at the door for individuals who have been living an extravagant lifestyle they cannot justify by their declared income.

What Triggers a Lifestyle Audit? Anything from a Shiny Ferrari to An Anonymous Tip Off

A lifestyle audit assesses whether a person’s standard of living is consistent with income from legitimate sources and formally declared to Sars. It is not a voluntary process and is typically intelligence driven.

The FIC Act requires a person who carries on a business or an employee who suspects money laundering, terrorist financing, or an unusual transaction to report it to the FIC. The FIC says all citizens have a responsibility to report suspicious and unusual transactions and behaviour. This may include a national department, as well as a colleague or neighbours who suspect something untoward and anonymously report you.  

Intelligence, however, comes in many forms. During a discussion on wealth taxes, a Sars official recounted noticing 26 eye-catching Ferraris parked outside a luxury hotel. After recording the registration numbers and comparing them to the owners’ tax returns, Sars found that none had declared annual income exceeding R400 000.00. This raised red flags as the price tags of the cars run well into the millions.

Sars Commissioner Edward Kieswetter has also publicly stated that Sars notices social media posts where taxpayers openly boast about expensive vehicles or luxury purchases, which may prompt Sars to look deeper.

Once intelligence exists and is shared, the scope for remedial action narrows significantly. When an audit is underway, the state is no longer asking questions in the abstract. It is actively testing explanations against data already in its possession.

Why the Voluntary Disclosure Programme (VDP) Must Come Before Scrutiny

For taxpayers concerned that Sars scrutiny may be imminent, the VDP, regulated by the Tax Administration Act, No. 28 of 2011 (“TAA”), remains the most effective tool available to taxpayers to ‘come clean’ and regularise past non-compliance. When used correctly and timeously, VDP can provide relief from understatement penalties and amnesty against criminal prosecution.

However, it is important to note that the VDP is premised on voluntary and complete disclosure before Sars becomes aware of non-compliance. In an environment where multiple organs of state may be sharing intelligence, the risk is not only that Sars becomes aware, but that it does so indirectly, through information generated outside the tax system.

Seen in this light, the real message is that lifestyle audits can close the door on VDP entirely. This highlights the importance of engaging with seasoned tax attorneys where a non-disclosure to Sars is suspected, to ensure that VDP relief is timeously secured.

VDP versus Enforcement

The VDP allows taxpayers to come forward on a voluntary basis, control the narrative, quantify exposure, and resolve matters in a structured and legal manner. This enables taxpayers to claim the benefit of fully waiving penalties and protection from criminal prosecution.

A lifestyle audit, by contrast, places the taxpayer on the back foot, responding to questions, framed by government organs and potentially facing parallel criminal, regulatory, and tax consequences. 

Conclusion

The expansion of lifestyle audits and enhanced information sharing across government signals a more assertive and coordinated enforcement environment. For taxpayers with historical non-compliance, the real risk is no longer limited to a Sars audit, but that non-tax intelligence will trigger scrutiny from multiple state bodies.

Do not think you will get away with it. In this context, the VDP is more important than ever and the window to act is now – before intelligence gathering occurs, before information is shared, and before questions are formally asked. By seeking early advice and enlisting a skilled tax attorney, proactive disclosure to Sars can be the difference between a managed outcome and a reactive defence with far-reaching consequences.

Written by André Daniels, Head of Tax Controversy & Dispute Resolution at Tax Consulting SA