The turnover tax threshold in South Africa is R2.3 million in qualifying annual turnover, effective from 1 April 2026. If your business receives R2.3 million or less in a year of assessment, you can apply to be taxed as a micro business under the Sixth Schedule to the Income Tax Act No. 58 of 1962, paying a single low-rate tax on total receipts instead of separate income tax, VAT, provisional tax, capital gains tax, and dividends tax.1South African Revenue Service. Budget 2026 Frequently Asked Questions
The previous ceiling sat at R1 million for many years. The 2026 Budget more than doubled it, bringing a much larger pool of small businesses into the simplified regime.1South African Revenue Service. Budget 2026 Frequently Asked Questions Sole proprietors, partnerships, close corporations, and companies are all eligible in principle, though several exclusions apply regardless of size.
What Counts Toward the R2.3 Million
Qualifying turnover is gross receipts, not profit. It is every rand your business takes in during the year of assessment before you subtract a single expense. That includes sales of goods and services, fees and commissions, interest earned on business accounts, and the proceeds from selling capital assets like equipment or vehicles used in the business.
You cannot net expenses against receipts to squeeze under the line. If R2.4 million flowed in and R1.8 million went straight back out in costs, your qualifying turnover is still R2.4 million and you are over the threshold. This makes clean monthly bookkeeping more important here than in most regimes, because the number you report has no room for adjustment.2South African Revenue Service. Personal Income Tax
What You Pay Under the Regime
The rates are progressive. For years of assessment ending between 1 March 2026 and 28 February 2027:3South African National Treasury. Budget 2026 Tax Guide
- R1 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 and above: R12,500 plus 3% of the amount above R1,400,000.
The single payment replaces five separate obligations. A registered micro business does not lodge a normal income tax return on business profits, does not register as a VAT vendor, does not make provisional tax estimates twice a year, does not pay capital gains tax on business asset disposals (those receipts fall into turnover instead), and does not pay dividends tax on distributions to shareholders.4South African Revenue Service. Turnover Tax
Who Is Excluded Even Below the Threshold
Staying under R2.3 million is necessary but not sufficient. Several categories of business fall out regardless of turnover.
Personal Service Providers and Labour Brokers
If your business is classified as a personal service provider or a labour broker without a SARS exemption certificate, you cannot register. These rules stop individuals who are effectively employees from routing income through a micro-business shell to pay a lower rate.5South African Revenue Service. Administration of Turnover Tax – External Guide
Professional Services Income
For a natural person, more than 20% of total receipts coming from professional services disqualifies you. For a company, the trigger is more than 20% from professional services and investment income combined. Accountants, lawyers, engineers, and others in listed professions should calculate the ratio carefully before applying.5South African Revenue Service. Administration of Turnover Tax – External Guide
Capital Asset Disposals
If proceeds from selling business property and other capital assets (excluding financial instruments) exceed R1.5 million over a rolling three-year window, you must deregister.5South African Revenue Service. Administration of Turnover Tax – External Guide
Shareholders and Partners
A company on the regime can only have natural persons as shareholders. If a trust or another company holds shares at any point during the year, the company loses its eligibility. A partner in more than one partnership cannot use turnover tax, and every partner in a qualifying partnership must be a natural person. Certain passive holdings do not disqualify you, including shares in listed companies, collective investment schemes, body corporates, share block companies, and venture capital companies.5South African Revenue Service. Administration of Turnover Tax – External Guide
Splitting a Business Between Connected Persons
SARS anticipated that some owners would try to divide a single operation between family members or related entities so each portion sits below the ceiling. The Sixth Schedule combines the turnovers of connected persons where the activities are really part of one business and the split was done mainly to stay under the limit. If the combined figure clears the threshold, none of the connected parties qualify.5South African Revenue Service. Administration of Turnover Tax – External Guide
How to Register
Registration runs on Form TT01. You can submit it through the SARS Online Query System, or complete it manually and deliver it to SARS by appointment or email.6South African Revenue Service. How to Register
Timing is strict. An existing business must file the TT01 before the start of the year of assessment in which it wants the regime to apply, unless the Commissioner publishes a later date. A new business that starts trading partway through a year has two months from its start date to submit. Miss the window and you are taxed under the standard system for that year.6South African Revenue Service. How to Register
SARS will confirm approval or come back with questions. Keep a copy of the submitted TT01 and proof of delivery.
Filing and Payments Once Registered
Turnover tax runs on a fixed rhythm. Two interim payments come during the year, followed by an annual return.
- First interim payment: by the last business day of August, on a TT02 payment advice.
- Second interim payment: by the last business day of February.
- Annual TT03 return: between 1 July and 31 January of the following year, aligned with the normal income tax filing season.
The interim payments are based on your estimated turnover, so monthly tracking of receipts matters. Underestimate and you can face interest charges when the final calculation catches up.4South African Revenue Service. Turnover Tax
If Your Turnover Crosses the Line
Should qualifying turnover breach R2.3 million during a year of assessment, and the increase is not minor and temporary, you must deregister. The SARS external guide sets a 21-day notification window from the breach.5South African Revenue Service. Administration of Turnover Tax – External Guide
Once you leave the regime, re-entry is restricted. The Sixth Schedule has historically applied a strict rule preventing businesses that exit from registering again. That makes the initial decision a serious one. A business realistically expecting to cross R2.3 million within a year or two is often better off staying in the standard system rather than switching in and losing the option to return.
Is It Worth Registering
For a business with simple operations and tight margins, the numbers are hard to beat. Zero tax on the first R600,000 of turnover and 1% on the next bracket leaves more cash inside the business than the standard calculation usually does. Avoiding VAT registration alone strips hours out of monthly record-keeping.
The catch is that no deductions are allowed. A trader who spends R500,000 on stock to generate R900,000 in sales may pay more turnover tax than the income tax that would have been due after deducting the cost of goods. You also lose input VAT recovery on purchases, which matters if your suppliers are VAT-registered and your customers are not.
Run the calculation both ways before committing. Compare the turnover tax liability at your expected receipts against income tax on the same business after legitimate expenses. Service businesses with low overheads almost always come out ahead; trading businesses with heavy cost of goods deserve a closer look.