Turnover Tax became significantly more relevant to South African micro and small businesses in 2026. SARS increased the qualifying annual turnover limit from R1 million to R2.3 million, effective 1 April 2026, and increased the tax-free band to R600,000.
The regime is intended to simplify tax administration for qualifying micro businesses by calculating tax mainly on turnover rather than taxable profit. But the R2.3 million limit is only the starting point: a business can still be excluded because of its activities, ownership structure or sources of income.
What is Turnover Tax?
Turnover Tax is an optional simplified tax system for qualifying micro businesses. SARS describes it as a regime that can replace several normal tax obligations, including income tax and provisional tax, while qualifying micro businesses can in certain circumstances still be VAT-registered.
The calculation is based on taxable turnover, so it behaves differently from ordinary income tax, which generally focuses on taxable profit after allowable deductions.
2026/27 Turnover Tax rates
| Taxable turnover | 2026/27 rate |
|---|---|
| R1 – R600,000 | 0% |
| R600,001 – R950,000 | 1% of taxable turnover above R600,000 |
| R950,001 – R1,400,000 | R3,500 + 2% above R950,000 |
| R1,400,001 and above | R12,500 + 3% above R1,400,000 |
The annual turnover ceiling for the regime is R2.3 million. The rates above apply to years of assessment ending between 1 March 2026 and 28 February 2027.
Who may qualify?
SARS says the following types of taxpayers may potentially qualify, provided the other requirements are met:
- Sole proprietors
- Partnerships
- Close corporations
- Companies
- Co-operatives
The business must meet the turnover test and also pass the additional qualifying tests. A turnover below R2.3 million does not automatically mean that the business qualifies.
Important exclusions to check
- Professional services: where more than 20% of relevant receipts are from professional services, the taxpayer may be excluded. SARS examples include accounting, auditing, consulting, engineering, law, management and other specified professions.
- Investment income: companies can be excluded where investment income together with professional-service income exceeds the relevant 20% test.
- Personal service providers and labour brokers: these can be excluded from the regime.
- Ownership structures: certain company shareholding and investment structures do not qualify.
- Asset disposals: limits also apply to receipts from disposals of certain business assets over the prescribed period.
Because the qualifying tests can be technical, businesses should assess their full circumstances rather than relying only on annual sales.
Turnover Tax and VAT are not the same thing
The two systems should not be confused. SARS confirms that a qualifying micro business can be registered for Turnover Tax while also being VAT-registered. VAT has its own registration rules, including the new R2.3 million compulsory registration threshold applied from 1 April 2026.
If VAT is also relevant to your business, read our guide: VAT Registration in South Africa 2026: What the New R2.3 Million Threshold Means.
When can Turnover Tax make sense?
For a qualifying business with relatively simple operations, Turnover Tax can reduce administrative complexity. However, because tax is based on turnover rather than profit, it is important to compare the likely result with the normal income-tax system. A low-margin business and a high-margin business with the same turnover can have very different outcomes.
A practical review before registering
- Confirm expected annual qualifying turnover.
- Identify how much income comes from professional services or investment income.
- Review the ownership/shareholding structure.
- Check whether the business falls into an excluded category.
- Compare the estimated Turnover Tax result with normal income tax.
- Keep reliable sales and accounting records even if the tax regime is simplified.
- Consider VAT obligations separately.
Where Aquinas can help
Aquinas Business Consulting can help SMEs organise their bookkeeping and financial information, assess which records are needed for tax administration and prepare for discussions around the appropriate tax route. See our Tax & SARS Compliance Services and Accounting & Bookkeeping Services.
Official SARS sources
This article provides general information only. Eligibility and tax outcomes depend on the specific facts of the business.
Review your small-business tax position with better records.
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