What is Turnover Tax and What’s New as of Budget 2026?
Turnover Tax is a simplified tax regime for micro- and small-businesses (SMMEs) in South Africa, replacing multiple taxes like Income Tax, Provisional Tax, Capital Gains Tax, Dividends Tax, etc., with a single return based on turnover. Under Budget 2026:
- The Turnover Tax threshold increased from R1 million to R2.3 million annual turnover. (sars.gov.za)
- The tax-free portion of turnover is set at R600,000. Beyond that, progressive rates (1%, 2%, 3%) apply as turnover increases within the R2.3 million bracket. (sars.gov.za)
- Effective date for eligibility depends: individuals for year of assessment starting 1 March 2026; companies from 1 April 2026. (sars.gov.za)
Pros and Cons: Decision Frame
| Advantage | Why It Might Be Right for You |
|---|---|
| Much simpler compliance | Single turnover-based return, no provisional returns, no CGT/dividends tax to worry about. |
| Lower tax on low turnover | First R600,000 taxed at 0%, which means very small SMMEs may pay little or nothing. |
| Reduced accounting costs | Less detailed bookkeeping required compared to standard income tax. |
| Drawback | Potential Risks or Costs |
|---|---|
| Missed deductions | Costs like salaries, rent, depreciation might be less useful since turnover-based. |
| Ceiling effect | If you exceed R2.3 million turnover, you’ll transition to standard tax which may involve more reporting and potentially higher tax. |
| Growth deterrent? | Some businesses may aim to stay under threshold to avoid complexities, slowing growth. |
| Lack of tax reliefs and incentives | Incentives like special deductions may only apply under standard income tax. |
Practical Guidance & Examples
- Small café startup with turnover R1.5 million, low profit margins: likely better under turnover tax—simple, lower admin burdens.
- Design agency with high operating costs and equipment depreciation: standard income tax may offer more net advantage despite heavier compliance.
Action-Planning Checklist
- Estimate your annual turnover and costs for next 12 months to forecast which regime yields lower tax.
- Model both scenarios: turnover tax vs standard income tax, including potential deductions under standard scheme.
- Pay attention to timing—if your company assessment starts 1 April, eligibility kicks in then.
- Ensure register for Turnover Tax via SOQS if eligible. Keep books but less detailed.
- Anticipate threshold crossing: prepare to transition to standard tax with appropriate accounting.
Conclusion
Budget 2026 provides tools to reduce compliance burdens and support small businesses. Turnover Tax may be ideal for early-stage, low-margin, small-scale operations. For businesses nearing high growth or with heavy investment or fixed costs, standard income tax may still deliver more benefits despite its complexity.