Compliance
Compliance Focus: South Africa’s Filing Season 2026 and Ring-Fencing of Losses Change
For Filing Season 2026, South Africa has amended rules on ring-fencing of assessed losses, reducing the threshold and changing how eligibility works—a critical shift for businesses and trusts seeing losses.
By NomadicTax Research Team • 5-8 min read • August 10, 2026
## What is Ring-Fencing of Losses?
In South Africa, Section 20A of the Income Tax Act deals with **ring-fencing**: it limits which assessed losses a taxpayer may deduct from income depending on certain thresholds and types of income. Previously, the rule kicked in at the top marginal tax rate—the highest bracket (45%). Now, this has been changed. ([sars.gov.za](https://www.sars.gov.za/latest-news/changes-for-filing-season-2026/?utm_source=openai))
## The Key Change for Filing Season 2026
- As of years of assessment **starting on or after 1 March 2026**, **section 20A applies from a marginal tax rate of 39%**, not 45%. That means taxpayers in the 39% tax bracket could face the new ring-fencing rules where previously only the top bracket was affected. ([sars.gov.za](https://www.sars.gov.za/latest-news/changes-for-filing-season-2026/?utm_source=openai))
- The 45% rate still exists for those in the top bracket, but many more taxpayers now fall into the 39% bracket, expanding scope of ring-fencing.
- Filing dates for individuals, trusts, and provisional taxpayers have been clarified: non-provisional individuals must file between **13 July and 23 October 2026**; provisional taxa-pay-ers between **13 July 2026 and 22 January 2027**. Trusts have slightly different windows. Auto-assessments also begin 1 July 2026. ([sars.gov.za](https://www.sars.gov.za/latest-news/changes-for-filing-season-2026/?utm_source=openai))
## Who Is Most Impacted?
- Businesses or individuals with income that straddles the 39% and 45% marginal rate bands. If you're earning just above the threshold for 39%, you'll need to plan your deductions carefully.
- Trusts, as well as provisional taxpayers like contractors, freelancers and digital nomads who often have mixed sources of income. They need to ensure losses are categorized correctly.
- Companies planning investment losses or startup losses should check whether their model still qualifies for deductions under ring-fencing rules.
## Compliance Tips & Strategies
- **Forecast income carefully**: if you expect to move into the 39% bracket, assess whether your losses in earlier years will be limited by ring-fencing rules. This may influence decisions to incur losses now vs carry forward.
- **Maintain detailed records** of type of income, loss source, and whether it’s ring-fenced to ensure correct classification.
- **Consult an expert** if you rely heavily on assessed losses—this change changes financial modelling significantly.
- **File on time**: note the fixed windows for filing and deadlines for amendments. Missing deadlines may cost you access to deductions or refunds.
## Example Scenario
Suppose you run a consulting firm with mixed income—some from South Africa, some from abroad—for the 2026 year. Your total taxable income places you firmly in the **39% bracket**. You carried over losses from your first year in business. Previously, these losses might have been ring-fenced only when you hit 45%, but now the 39% threshold means they could be limited. You’d need to evaluate whether to use those losses immediately or structure income/loss balance differently.
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Staying compliant under these amended rules means understanding not just what’s new, but where your income and income sources place you. Proper planning, robust bookkeeping, and proactive forecasting will protect businesses and individuals from unexpected liability under ring-fenced loss rules.