Turnover tax for micro businesses

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 was designed for the smallest businesses, where keeping a full set of accounts costs more than the tax it saves. If you turn over R2.3 million or less, compare it with the standard route before you choose. Because it ignores costs, a business with thin margins can pay more on turnover tax than it would on profit.

How turnover tax works

Turnover tax is an elective system for micro businesses with a qualifying turnover of R2.3 million or less in a tax year. The limit was R1 million until the 2026 Budget raised it. The new limit applies from years of assessment starting on 1 March 2026 for individuals and 1 April 2026 for companies. "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, a high-margin business pays little on it. A low-margin business can pay more than it would under the normal profit-based system. Your margin decides which system costs less.

The 2026/27 turnover tax brackets

SARS publishes these rates for years of assessment ending between 1 March 2026 and 28 February 2027. Tax is charged on your total qualifying turnover for the year:

• Up to R600,000: 0%
• R600,001 to R950,000: 1% of the amount above R600,000
• R950,001 to R1,400,000: R3,500 plus 2% of the amount above R950,000
• R1,400,001 to R2,300,000: R12,500 plus 3% of the amount above R1,400,000

What it replaces

For a registered micro business, the turnover tax 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 few other items sit outside the simplified regime.

Who qualifies

Turnover of R2.3 million or less is the headline test, but it isn't the only one. Some businesses are excluded even under R2.3 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 earns mostly investment income and little 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 before you assume you qualify.

How your margin changes the bill

Tax is charged on sales, so two businesses with the same turnover can have very different results depending on margin. A consultant who keeps 90% of turnover as profit pays little tax relative to profit. A trader who keeps 10% pays tax on money that goes straight to suppliers.

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. Businesses with margins that swing from year to year carry that risk.

Payment dates

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. You still have to estimate, pay on time and file. Miss the interim payments and SARS applies the usual late-payment penalty and interest, as it would on any other tax. Diarise both dates the day your tax year opens.

Records you must keep

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. That is less bookkeeping than a normal company needs.

Mistakes to avoid

Check each of these before you elect in:

• 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. The R2.3 million limit is one test. Businesses that mainly render professional services are excluded below it.
• Not planning for the exit. Cross R2.3 million and you move into normal tax and provisional tax. Budget for the larger payments before that happens.
• Assuming you can flip in and out. Once you elect in, you stay in for a set period. You cannot switch each year.

How to register (and deregister)

You elect into turnover tax with SARS, and the timing matters — you register before the start of a tax year, and once in, you commit for a set period. SARS set it up this way to stop businesses switching whenever it suits them.

1. Check you qualify — turnover R2.3 million or less, and you clear the other micro-business tests (professional-service and investment businesses are the usual exclusions)
2. Run your own numbers both ways — turnover tax versus the normal Small Business Corporation rates — so you know whether it costs less
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 R2.3 million, so plan that transition in advance

Is it right for you?

Turnover tax works well for a low-cost service business — consultants, coaches, small trades, creatives — comfortably under R2.3 million, where most of the turnover is profit. It works badly for a stock-heavy, thin-margin business, anyone expecting loss-making years, or a business about to pass R2.3 million. Your margin decides which system leaves you with the lower bill.

If you're weighing it up, talk to us. We'll run your figures both ways, turnover tax and normal tax, and tell you which one leaves you better off before you commit.