Turnover tax is the simplest business tax South Africa has. You don't work out your profit, you don't itemise deductions, and you don't file two provisional returns a year. You take your total sales, run them through one small table, and that's your tax. It exists because for the smallest businesses — the ones where a full set of accounts costs more than the tax saved — the normal system is more admin than it's worth. If you turn over under R1 million, it deserves a proper look before you default to the standard route. But it's a blunt instrument, and for the wrong business it quietly costs more than it saves. This guide walks through exactly when it wins and when it stings.

What turnover tax actually is

Turnover tax is an elective system for micro businesses with a qualifying turnover of R1 million or less in a tax year. "Turnover" means your taxable receipts — broadly the money that comes in from your trade — not your profit. You don't subtract rent, stock, salaries or any other cost. You take total qualifying turnover for the year and apply the bracket rate. Because it ignores expenses, it's simple but crude: a high-margin business does very well on it, a low-margin business can be worse off than under the normal profit-based system. That single fact — your margin — decides the whole thing.

The mistake we see most is owners hearing "simple tax" and assuming "cheaper tax". Sometimes it's both. Often, for a business that buys and resells stock, it's simpler and more expensive. Simplicity is the feature — cheapness is not guaranteed.

The 2026 turnover tax brackets

These are the rates for the 2026 tax year — SARS adjusts these annually, so always confirm the current figures before you rely on them. Tax is charged on your total qualifying turnover for the year:

  • Up to R335,000 — 0% (you pay nothing at all)
  • R335,001 to R500,000 — 1% of the amount above R335,000
  • R500,001 to R750,000 — R1,650 plus 2% of the amount above R500,000
  • R750,001 to R1,000,000 — R6,650 plus 3% of the amount above R750,000
R335,000
Your first R335,000 of turnover is taxed at 0% — for many genuinely tiny businesses that means no income tax bill at all.
Worked example

A R600,000 cleaning business

You run a small cleaning business turning over R600,000 a year with modest costs. On turnover tax you pay R1,650 (the fixed amount at R500,000) plus 2% of the R100,000 above that — R2,000 — for a total of R3,650 for the year. That single figure settles your income tax and your provisional tax. For a low-cost service business like this, that is an unbeatable deal.

What it replaces

This is where turnover tax earns its keep. For a registered micro business, that one payment replaces both of these:

  • Income tax on the business
  • Provisional tax — the two IRP6 payments a year that normal taxpayers make

VAT stays optional — a micro business can register for VAT voluntarily if it makes sense, but turnover tax doesn't force it and doesn't remove the compulsory-registration rule if you ever cross the VAT threshold. Capital gains and a handful of other items sit outside the simplified regime. That's deliberate: it keeps the system aimed at simple, straightforward trading operations.

Who qualifies — and who's shut out

Turnover of R1 million or less is the headline test, but it isn't the only one. The system targets genuine small trading businesses, so some are excluded even under R1 million. In broad terms you can be blocked if:

  • Too much of your income comes from rendering professional services — mainly professional-service providers are excluded
  • You hold shares or interests in other companies beyond what's permitted
  • Your business mostly earns investment income rather than trading income
  • You're a personal service provider or labour broker without the right exemption

The point of these tests is to stop higher earners using a small-business regime as a loophole. If you're a consultant, bookkeeper, architect or similar, check the professional-services exclusion carefully before you assume you qualify — in practice this is where most applications fall down. It's a five-minute question worth asking up front.

The margin question — where it can cost you more

Because tax is on sales, not profit, the same turnover produces wildly different outcomes depending on your margin. A consultant keeping 90% of turnover as profit loves turnover tax. A trader keeping 10% hates it — they're taxed on money that's really their suppliers'.

Worked example

When turnover tax costs you more

A retailer buys stock for R700,000 and sells it for R900,000 — a R200,000 gross profit before other overheads. On turnover tax the bill is R6,650 plus 3% of the R150,000 above R750,000 (R4,500) = R11,150, charged on the full R900,000 of sales. Run the same business through the profit-based Small Business Corporation rates on its far smaller taxable profit, after rent, wages and other costs, and the bill can easily come out lower. High turnover, thin margin — turnover tax punishes you.

There's a worse version of this: a loss-making year. Under the normal system a loss means no tax. Under turnover tax you can still owe on your sales even when the business made nothing. For a business with volatile margins, that's a real risk, not a theoretical one.

The payment cycle — simple, not effortless

Turnover tax is paid in two interim payments during the year — around the end of August and the end of February — with a final reconciliation on your annual return. So the admin is light, but it isn't zero. You still have to estimate, pay on time and file. Miss the interim payments and SARS applies the usual late-payment penalty and interest, exactly as it would on any other tax. Diarise both dates the day your tax year opens.

Records: lighter, not none

You don't need a full profit-and-loss with every expense captured and categorised. But you still have to prove your turnover, so you can't run the business out of your head. At a minimum, keep:

  • A record of every amount received — invoices, till records, bank deposits
  • Records of business assets you buy or sell above a set value
  • Your interim payment calculations and proof of what you paid SARS

Keep it all for five years, as with any tax record. It's a far lighter load than a normal company's bookkeeping — which, for a genuinely tiny business, is exactly the point.

Common mistakes owners make

The regime is simple, but the decision around it isn't. The errors we see again and again:

  • Choosing it on simplicity alone. A trader with thin margins picks turnover tax to save admin, then pays more tax than the normal system would have charged. Always run the numbers both ways first.
  • Forgetting VAT still exists. Turnover tax doesn't cap your VAT obligation — cross the compulsory VAT threshold and you must still register for VAT.
  • Ignoring the professional-services exclusion. Consultants and professionals often assume the R1m limit is the only test and apply when they're actually shut out.
  • Not planning for the exit. Cross R1 million and you fall out of the system into normal tax and provisional tax, often mid-stride, with a cash-flow shock nobody budgeted for.
  • Assuming you can flip in and out. Turnover tax is a commitment for a period, not a year-by-year choice.

How to register (and deregister)

You elect into turnover tax with SARS, and the timing matters — you typically register before the start of a tax year, and once in, you commit for a set period rather than switching whenever it suits. That commitment is deliberate: it stops businesses gaming the system.

  1. Check you qualify — turnover R1 million or less, and you clear the other micro-business tests (professional-service and investment businesses are the usual exclusions)
  2. Run your actual numbers both ways — turnover tax versus the normal Small Business Corporation rates — so you know it's genuinely cheaper, not just simpler
  3. Apply to SARS to be registered as a micro business for turnover tax, within the allowed window
  4. Diarise your two interim payment dates (around end-August and end-February) and file your annual return
  5. To leave, deregister with SARS — or you're moved off automatically once you exceed R1 million, so plan that transition before it happens, not after

Cross R1 million in turnover and you're out of the system. The clean way to handle it is to plan the move to normal tax and provisional tax in advance — the messy way is to discover it at assessment with a backdated bill.

Is it right for you?

Turnover tax works well for a low-cost service business — consultants, coaches, small trades, creatives — comfortably under R1 million, where most of the turnover is profit anyway and the owner values a quiet life. It works badly for a stock-heavy, thin-margin business, anyone expecting loss-making years, or a business about to breach R1 million. The honest answer for most owners is that it's brilliant for the right business and a trap for the wrong one, and the maths turns entirely on your margin.

If you're weighing it up, talk to us. We'll run your real figures both ways — turnover tax and normal tax — and tell you straight which one leaves you better off. It's a half-hour conversation that can save you thousands and stop you locking into the wrong system for years.