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

Published Tuesday 20 October 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 of R2.3 million or less. 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 increase to the qualifying threshold 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. Existing businesses must register before the start of the tax year, while new businesses have two months from the date they start trading.

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 you work out what you owe from your total receipts.

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 aren’t 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 not exceed 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 qualifying turnover under SARS guidance, so they don't count towards the threshold.

Turnover tax rates

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

Turnover tax rates for 2026/2027

The following brackets apply to years of assessment ending between 1 March 2026 and 28 February 2027:

• 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’s 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, as its guidance on businesses that don’t qualify sets out:

• 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 isn’t a natural person (for example, a company owned by another company)
• Businesses split between connected persons when the parts form one business and staying under R2.3 million is a main reason (SARS then combines their turnover)
• Businesses that previously registered for turnover tax and voluntarily left the system

If your business falls into any of these categories, you’ll 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’s 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: If you run a registered micro company, dividends up to R200,000 a year in total are exempt from dividends tax, provided shareholders submit a declaration.

Disadvantages of turnover tax

Turnover tax isn’t 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 not exceed 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). SARS also provides a quick test to help you check your eligibility.

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 and supporting business documents.

If your business is already trading, you must complete the process before the start of the tax year in which you want to start using turnover tax. If your business is new, SARS registration guidance gives you 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: Use these payment advices to make your provisional payments twice a year: the first six months into your tax year and the second at your tax year-end.
• TT03 final return: Submit this once a year after your tax year ends. For the 2026 filing season, individuals file income tax returns from 13 July (after auto-assessments, 1–12 July) to 23 October 2026 if non-provisional, or 22 January 2027 if provisional. Turnover tax itself is declared on the annual TT03 return, which individuals submit in line with this income tax return cycle.
• 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 and any dividends declared. SARS record-keeping rules also require a year-end list of assets costing more than R10,000 and liabilities exceeding R10,000.

What changed with turnover tax in the 2026 budget?

The 2026 national budget brought the first increase to the turnover tax qualifying threshold since the system was 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’s 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: SARS applies a R2.3 million VAT compulsory registration threshold from 1 April 2026, so your business can grow further before needing to register for VAT.

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’m on turnover tax?

Turnover tax means you’re not required to register for VAT, but you can choose to register for VAT voluntarily, with turnover tax and VAT running as separate systems alongside each other. From 1 April 2026, SARS allows voluntary VAT registration once your taxable supplies exceed R120,000 a year.

What happens if my turnover exceeds the threshold?

The SARS micro business tax guide says to notify SARS within 21 calendar days once you stop qualifying, such as when turnover passes R2.3 million. The guide still shows the old R1 million limit, so confirm the current process with SARS or a registered tax practitioner.

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 by electing to deregister before the start of a tax year. If you voluntarily leave turnover tax, you won’t 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.