Turnover tax South Africa: what it is and whether your business qualifies

Published Friday 14 August 2026

Table of contents

• What is turnover tax in South Africa?
• How turnover tax works
• Turnover tax rates
• Who qualifies for turnover tax?
• Turnover tax vs income tax
• Advantages of turnover tax
• Disadvantages of turnover tax
• How to register for turnover tax with SARS
• What changed with turnover tax in the 2026 budget?
• Simplify your business finances with Xero
• FAQs on turnover tax in South Africa

Key takeaways

• Turnover tax is a single, simplified tax for micro businesses in South Africa with annual turnover under R2.3 million. It replaces income tax, VAT, provisional tax, capital gains tax (CGT), and dividends tax.
• The 2026 budget raised the qualifying threshold from R1 million to R2.3 million and increased the tax-free band to R600,000. This is the first major update since the system launched.
• Tax is calculated on your gross turnover, not net profit. You can’t deduct business expenses, which means it suits low-expense businesses best.
• You register by submitting a TT01 form through the SARS Online Query System, or in person at a SARS branch. . You must register before 1 March of the relevant tax year. New businesses have two months from the date they start trading to register.

What is turnover tax in South Africa?

Turnover tax is a simplified system for micro businesses in South Africa that replaces multiple taxes with just one based on gross turnover. It’s administered by the South African Revenue Service (SARS) and targets the smallest businesses to make tax compliance more accessible.

The system is available to sole proprietors, partnerships, close corporations, companies, and co-operatives earning below the qualifying threshold of R2.3 million per year. If your business meets the criteria, you can opt into turnover tax instead of the standard income tax system.

The tax is calculated on your gross receipts for the year, not on your net profit – so don’t subtract expenses before working out what you owe.

Taxes replaced by turnover tax

When you register for turnover tax, it replaces several separate taxes you’d otherwise need to file:

• Income tax
• Value-added tax (VAT) – unless you choose to remain VAT-registered
• Provisional tax
• Capital gains tax (CGT)
• Dividends tax (with an exemption for distributions up to R200,000 per year)

This single-tax approach means fewer returns, fewer deadlines, and less paperwork throughout the year.

How turnover tax works

Turnover tax is calculated on your total business receipts during the tax year, with no deductions for expenses, salaries, or overheads. The amount you owe depends purely on how much money comes into your business.

You make provisional payments twice a year and submit a final return annually. Unlike income tax, turnover tax returns are not filed through SARS eFiling. You submit them manually to SARS, either at a branch or via email.

The system uses a progressive rate structure, similar to income tax brackets. Different portions of your turnover are taxed at different rates. The first portion falls within a tax-free band, and rates increase gradually as your turnover rises.

Qualifying turnover vs taxable turnover

Your qualifying turnover determines whether you’re eligible for the system. This is your total gross receipts for the year, and it must stay below R2.3 million. Gross receipts include income from sales, services, commissions, fees, and any other amounts received during the normal course of business.

Your taxable turnover is the amount SARS uses to calculate how much tax you owe. It’s based on the same gross receipts, but the rate brackets determine what percentage applies to each portion of your turnover. Capital receipts – such as proceeds from selling a business asset – are excluded from your qualifying turnover, so they don't count toward the R2.3 million threshold.

Turnover tax rates

The 2026 budget introduced significantly lower turnover tax rates and a much higher tax-free threshold. The new brackets nearly double the tax-free band and extend the system significantly to businesses with turnover up to R2.3 million, up from R1 million.

Turnover tax rates for 2026/2027 (from 1 April 2026)

The following brackets apply to tax years starting on or after 1 April 2026:

• R0 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.

Worked example

Suppose your business earns R1,200,000 in annual turnover during the 2026/2027 tax year. Here is how to calculate your turnover tax:

1. The first R600,000 is taxed at 0%, so you owe R0 on that portion.
2. The next R350,000 (from R600,001 to R950,000) is taxed at 1%, which equals R3,500.
3. The remaining R250,000 (from R950,001 to R1,200,000) is taxed at 2%, which equals R5,000.
4. Add those together: R0 + R3,500 + R5,000 = R8,500.

Your total turnover tax for the year would be R8,500.

Under the old brackets, the business would have exceeded the R1,000,000 threshold entirely and been ineligible.

Who qualifies for turnover tax?

Turnover tax is available to micro businesses in South Africa with annual qualifying turnover of R2.3 million or less. It applies to several business types, though some activities may make you ineligible.

Eligible business types

The following entities can register for turnover tax:

• Sole proprietors
• Partnerships (all partners must be natural persons)
• Close corporations
• Companies (with restrictions on shareholding)
• Co-operatives

Who is excluded from turnover tax?

Not every small business qualifies. SARS excludes certain types of businesses from the system:

• Professional service providers where more than 20% of total receipts come from professional fees (for example, doctors, lawyers, accountants, or consultants).
• Personal service providers.
• Labour brokers.
• Any company or close corporation where a shareholder or member is not a natural person (for example, a company owned by another company).
• Businesses that have been artificially split between connected persons to stay under the R2.3 million threshold (SARS combines the turnover of these connected businesses, which must collectively stay under R2.3 million to be eligible).
• Businesses that previously registered for turnover tax and voluntarily left the system.

If your business falls into any of these categories, you will need to file under the standard income tax system.

Turnover tax vs income tax

The main difference between turnover tax and income tax is how your tax is calculated. Turnover tax is based on gross receipts, while income tax is based on net profit after deducting allowable expenses. Your choice depends on your expense levels and how much admin you’re prepared to handle.

Here is how they compare across key factors:

• How tax is calculated: turnover tax is based on gross turnover; income tax is based on net profit.
• Expense deductions: turnover tax allows none; income tax lets you claim allowable business expenses.
• Number of tax returns: turnover tax requires two payment advices and one annual return; income tax requires two provisional returns and one annual return (though income tax submissions are notably more complex).
• Filing method: turnover tax is submitted by branch appointment or email to SARS; income tax can be filed via eFiling.
• Best suited for: turnover tax works well for low-expense businesses; income tax works better for businesses with high operating costs.

If your business has minimal expenses, turnover tax likely results in a lower tax bill and less admin. If you spend a large portion of your revenue on stock, equipment, or overheads, income tax may save you more because you can deduct those costs. However, due to the 2026 bracket changes, turnover tax can still work out cheaper even for businesses with significant costs – the exception is businesses operating on very thin margins, where net profit is so low that income tax on that profit would be negligible.

Advantages of turnover tax

Turnover tax offers several practical benefits for eligible micro businesses.

• Simplified compliance: You deal with one tax instead of up to five separate obligations, which requires less admin.
• Reduced record-keeping: You don’t need to track every deductible expense in detail, since the tax is based on gross turnover.
• Lower rates for small earners: The 2026/2027 brackets mean the first R600,000 of turnover is completely tax-free.
• Dividend withholding tax exemption: Distributions up to R200,000 per year are exempt from dividends tax under the turnover tax system.

Disadvantages of turnover tax

Turnover tax is not the right fit for every micro business. There are notable limitations that could make the standard income tax system a better option depending on your circumstances.

• No expense deductions: You can’t claim costs like rent, stock purchases, or equipment against your taxable amount, which may mean paying more tax than you would under income tax.
• Revenue cap: Your annual turnover must stay below R2.3 million, so you may need to switch systems as your business grows.
• Manual filing only: You can’t submit turnover tax returns through SARS eFiling, which adds an extra step compared to income tax.
• Higher effective rate for high-expense businesses: If your expenses are a very large share of your revenue, income tax could potentially result in a lower tax bill.
• Limited eligibility: Professional service providers, labour brokers, and businesses with corporate shareholders can’t use the system.

How to register for turnover tax with SARS

To register for turnover tax, you submit a TT01 form online through the SARS Online Query System (SOQS). SOQS includes a quick eligibility test before you submit.

You can also register in person at a SARS branch. If you prefer to register in person, download the TT01 form from the SARS website or collect one at a branch, book an appointment through the SARS eBooking system, and bring your identification documents, proof of business address, and business registration documents.

You must complete the process before 1 March of the tax year in which you want to start using turnover tax. If your business is new, you have two months from the date you start trading to register.

Filing and payment requirements

Once registered, you need to submit returns and make payments on a set schedule:

• TT02 provisional returns: Submit these twice a year, on the last business day of August and February, along with your provisional tax payments.
• TT03 final return: Submit this once a year after your tax year ends. Individuals submit during SARS filing season between 1 July and 31 January, while companies submit within 12 months of their financial year-end.
• Manual submission: All turnover tax returns must be filed manually through SARS, either in branch or via email, but not via eFiling.

You’re also required to keep accurate records throughout the year. Your records must include all amounts received, any dividends declared, assets with a cost of more than R10,000, and liabilities exceeding R10,000.

What changed with turnover tax in the 2026 budget?

The 2026 national budget brought the most significant changes to turnover tax since the system was first introduced in 2009. These changes took effect on 1 April 2026 and expanded access to the system while reducing the tax burden for existing participants.

Here is a summary of the key updates:

• Threshold increase: the qualifying turnover limit increased from R1 million to R2.3 million, opening the system to a much larger pool of micro and small businesses
• Higher tax-free band: the 0% bracket now covers the first R600,000 of turnover, up from R335,000 under the old rates
• New rate brackets: the brackets have been restructured with wider bands and more gradual increases, reducing the tax burden across all turnover levels
• Year-end restriction removed: previously, businesses registered for turnover tax had to use a specific tax year-end date; this restriction has been lifted
• Alignment with VAT threshold: the VAT compulsory registration threshold also increased to R2.3 million, meaning your business can grow further before needing to register for VAT separately

Simplify your business finances with Xero

Managing your tax obligations is easier when your financial records are organised and up to date. Xero's cloud accounting software helps you track income, reconcile bank transactions, and keep your books in order, so you’re always ready when filing season arrives.

Whether you’re on turnover tax or the standard income tax system, having a clear view of your finances helps you make confident decisions about your business. Xero brings your invoicing, expenses, and reporting together in one place, saving you time on manual admin.

Ready to take control of your business finances? Get one month free and see how Xero can help you stay on top of your numbers.

FAQs on turnover tax in South Africa

Here are answers to common questions about turnover tax in South Africa.

Can I claim business expenses under turnover tax?

No. Turnover tax is calculated on your gross receipts, so you can’t deduct expenses like rent, stock, or salaries. If your business has high expenses relative to revenue, compare the total tax you’d pay under both systems before choosing.

Do I still need to register for VAT if I am on turnover tax?

Turnover tax means you’re not required to register for VAT. However, you can choose to register for VAT voluntarily, and if you do, turnover tax and VAT operate as separate systems running alongside each other. If you choose not to voluntarily register, this means you can’t claim input VAT credits on purchases your business makes.

What happens if my turnover exceeds the threshold?

If your gross receipts go above R2.3 million during the year, you need to exit the turnover tax system. You must notify SARS within 21 days of exceeding the threshold. SARS will move you to the standard income tax system, and you may also need to register for VAT from that point.

Can I switch back to income tax after registering for turnover tax?

Yes, you can voluntarily leave turnover tax and return to the income tax system. You must notify SARS within 21 days of your decision to deregister. If you voluntarily leave turnover tax, you will not be permitted to re-enter the system at a later date.

Do I still need to pay employees' PAYE and UIF?

Yes. Turnover tax only covers taxes on your business income. If you employ staff, you’re still responsible for deducting and paying employees' tax (PAYE), Unemployment Insurance Fund (UIF) contributions, and Skills Development Levy (SDL) where applicable.