South Africa's turnover tax regime became much more important for small businesses in 2026 because SARS and National Treasury lifted the qualifying threshold from the old R1 million level to R2.3 million, effective . The tax-free turnover band was also reset to R600,000. For micro businesses that were previously too large for turnover tax but still too small to carry heavy compliance comfortably, this changes the planning conversation.
This guide was verified on May 2, 2026 against current SARS turnover tax pages, the SARS 2026/27 turnover tax rate table, the SARS Budget 2026 frequently asked questions, the SARS quick test for individuals and companies, and SARS's practical VAT-versus-turnover-tax examples. It is written for sole proprietors, close corporations, small companies, co-operatives, accountants and founders who need to decide whether turnover tax is a better operating lane than ordinary income tax and VAT.
If your immediate question is VAT pricing rather than micro business eligibility, start with the South Africa VAT Calculator and the South Africa VAT registration guide. If your question is whether a small business can simplify the whole tax stack, this guide is the better place to start.
2026/27 Turnover Tax Snapshot
| Question | Current SARS position verified May 2, 2026 |
|---|---|
| Qualifying turnover limit | R2.3 million or less for a qualifying micro business. |
| Effective date of the threshold increase | April 1, 2026. |
| Tax-free turnover band | 0% up to R600,000 for the 2027 year of assessment table. |
| Top turnover tax band | R12,500 plus 3% of taxable turnover above R1.4 million. |
| Possible business forms | Sole proprietors, partnerships, close corporations, companies and co-operatives, subject to exclusions. |
| Registration route | SARS says registration is available through the SARS Online Query System and supporting guidance routes. |
| Main trade-off | Lower admin and low turnover-based rates, weighed against VAT, input tax and exclusion rules. |
The central idea is simple. Turnover tax taxes a qualifying micro business on taxable turnover rather than normal taxable profit. SARS describes it as a simplified system that can replace income tax, VAT, provisional tax, capital gains tax and dividends tax for qualifying micro businesses. The word "can" matters because a business registered for turnover tax may still choose to remain in the VAT system.
That makes turnover tax a real planning tool, not merely a small-business label. A business with low expenses, mostly consumer customers and simple records may find turnover tax cleaner than a normal income-tax and VAT stack. A business with high input VAT, mostly VAT-registered customers, exports, or complex ownership may need to stay out of turnover tax even when the turnover number looks attractive.
Current SARS Turnover Tax Rates for 2026/27
SARS's current turnover tax table applies to a year of assessment ending on any date between March 1, 2026 and February 28, 2027. The same table appears on the main SARS turnover tax page and the SARS tax-rates page.
| Taxable turnover | Turnover tax for 2026/27 | Plain-English reading |
|---|---|---|
| R0 to R600,000 | 0% | No turnover tax on the first R600,000 of taxable turnover. |
| R600,001 to R950,000 | 1% of taxable turnover above R600,000 | The first paid band starts only after the tax-free band. |
| R950,001 to R1,400,000 | R3,500 plus 2% of taxable turnover above R950,000 | The fixed R3,500 reflects the tax from the previous band. |
| R1,400,001 to R2,300,000 | R12,500 plus 3% of taxable turnover above R1,400,000 | The top band still uses a low marginal rate compared with normal profit tax. |
Here is a formula walkthrough using the published SARS table. If a qualifying micro business has taxable turnover of R1,800,000 in the 2026/27 table, it falls into the top band. The calculation is R12,500 plus 3% of R400,000, because R1,800,000 minus R1,400,000 is R400,000. The turnover tax is therefore R24,500. This example uses the SARS rates only. It does not assume any fictional expenses, margins or owner drawings.
That low number is the reason turnover tax looks compelling. The caution is that it is based on turnover, not profit. A low-margin business can still owe turnover tax even when normal taxable profit would have been small. A high-margin business may benefit more clearly. That is why the decision should be based on your customer mix, cost structure, VAT position and qualification tests, not the headline rate alone.
Who Can Qualify for Turnover Tax?
SARS says turnover tax is for micro businesses with annual turnover of R2.3 million or less. It lists the following taxpayer forms as potentially qualifying:
- individuals trading as sole proprietors;
- partnerships;
- close corporations;
- companies;
- co-operatives.
That list is only the starting point. The quick test is where many businesses fail. SARS says the business must answer the test questions correctly for the year of assessment, and if the answer to any one of the questions is "No", the business will not qualify for turnover tax registration for that year.
The first test is the easiest: qualifying turnover must be less than or equal to R2.3 million. Later tests deal with the business form, partnership composition, shareholder or member composition, excluded entities, year of assessment, investment interests and specific exclusions such as personal service providers or labour brokers without a SARS exemption certificate.
There is also a practical ownership trap. SARS says a partner in more than one partnership will not qualify for turnover tax. That does not automatically block the other partners if they are only partners in one partnership and can answer the rest of the test correctly, but it does mean the same person cannot casually use multiple partnerships as separate micro-business wrappers.
Quick Test Risk Points to Check Before Registering
The SARS quick test is short, but each answer carries legal weight. Treat it as a pre-registration checklist, not a marketing quiz.
| Risk point | Why it matters before you apply | Practical check |
|---|---|---|
| Turnover forecast | The business must stay within the R2.3 million qualifying turnover limit. | Use actual sales plus signed orders, recurring contracts and realistic pipeline. |
| Personal service provider or labour broker status | SARS flags this as an exclusion unless the correct exemption applies. | Review whether the business mainly supplies personal services through one or few clients. |
| Business form | Only certain forms are listed by SARS as eligible. | Confirm whether the business is a sole proprietor, partnership, close corporation, co-operative or company. |
| Partnership members | SARS asks whether all partners will be individuals through the year. | Check every partner, not only the managing partner. |
| Shareholder or member status | Companies, close corporations and co-operatives face ownership restrictions. | Map shareholders or members and their other interests before applying. |
| Entity exclusions | Public benefit organisations, recreational clubs, associations of persons and small business funding entities are flagged. | Do not force turnover tax onto an excluded form just because the turnover is low. |
One line in the quick test still needs careful reading as of this verification date. The page asks whether the business has a year of assessment that ends on the last day of February, while the Budget 2026 FAQ says the restriction on tax year-end dates is removed to make the regime more attractive. Because those published SARS pages are not perfectly aligned, a non-February year-end business should verify the position with SARS or a tax practitioner before relying on the change in a registration decision.
Turnover Tax Versus VAT: The Decision That Matters Most
The 2026 changes link turnover tax and VAT in a direct way. SARS's practical examples compare the old VAT threshold of R1 million with the new R2.3 million compulsory VAT threshold from April 1, 2026. The examples show a business with annual turnover of R2.2 million that was previously required to register for VAT, but is no longer compulsory after the threshold increase. SARS then notes that such a business may choose turnover tax for lower rates and less administration.
That does not mean every R2.2 million business should leave VAT or enter turnover tax. It means the decision space is larger than it used to be.
| Business profile | Turnover tax may be attractive when... | VAT or normal tax may be better when... |
|---|---|---|
| Consumer services | Customers cannot claim input VAT and admin simplicity matters. | The business has high VAT-bearing input costs it wants to recover. |
| Retail or food | Margins are stable, records are simple and turnover stays below R2.3 million. | Supplier VAT, inventory complexity or zero-rated lines make VAT accounting valuable. |
| Business-to-business services | Clients accept non-VAT invoices and the cost base is light. | Clients expect VAT invoices or procurement rules prefer VAT vendors. |
| Growing company | Sales are safely below the threshold and growth can be monitored monthly. | Pipeline suggests the R2.3 million line will be crossed soon. |
Use the South Africa VAT Calculator to model VAT-inclusive and VAT-exclusive pricing before you change quotes. Then compare the commercial result with the turnover tax calculation. A small business can look cheaper to consumers outside VAT, but a VAT-registered corporate client may focus on recoverable input VAT instead of the sticker price. The tax math and the customer math are related, but they are not identical.
Payment Dates, Returns and Registration Channels
SARS describes three payment points for turnover tax. The first interim payment is in the middle of the tax year on the last business day of August. The second interim payment is at the end of the tax year on the last business day of February. The final payment happens after the annual TT03 turnover tax return is submitted and processed.
The annual return follows the annual income-tax return season timing. SARS says TT03 returns are submitted between July 1 and January 31 of the following year. The exact taxpayer filing context can still matter, so businesses should read the current SARS notice and correspondence for their registered profile.
For registration, SARS now points taxpayers to the SARS Online Query System for turnover tax registration and also keeps appointment and document routes. The operational lesson is simple: do not wait until the end of the tax year to decide. The eligibility check, VAT choice and records setup should happen before the business commits to pricing, contracts and invoicing workflows.
Records to Keep Under Turnover Tax
SARS says one advantage of turnover tax is reduced record-keeping. The main turnover tax page lists three record categories that must be kept:
- records of all amounts received;
- records of dividends declared;
- a list of each asset with a cost price above R10,000 at the end of the year of assessment, and liabilities above R10,000.
Reduced record-keeping does not mean no bookkeeping. A business still needs enough discipline to prove receipts, track the threshold, support VAT decisions, retain supplier evidence where relevant and answer SARS queries. If the business is near R2.3 million, monthly turnover tracking becomes a control, not an afterthought.
For small teams, a basic monthly dashboard is often enough: sales received, cumulative turnover for the year, rolling 12-month sales, VAT status, large assets, liabilities and any contracts that could push the business over the line. That kind of schedule also makes it easier to know when turnover tax has stopped being the right regime.
Practical Workflow Before Choosing Turnover Tax
Use this sequence before registering or changing tax posture:
- Confirm the entity form. Check whether the business is one of the forms SARS lists as potentially qualifying.
- Run the turnover forecast. Use actual received turnover and reliable forward orders. Do not use optimism as a compliance input.
- Complete the SARS quick test. Record the answer to each exclusion point and keep the evidence behind it.
- Model the SARS 2026/27 rate table. Calculate turnover tax at expected turnover levels, especially near R600,000, R950,000, R1.4 million and R2.3 million.
- Compare VAT and customer pricing. Use the VAT calculator, check whether customers need VAT invoices, and estimate any input VAT recovery that would be lost.
- Review the registration and payment calendar. Make sure the TT02 interim payments and TT03 annual return fit into the finance workflow.
- Check with a tax practitioner if ownership or year-end facts are unusual. This is especially important where SARS pages need interpretation or have not fully synchronized after the 2026 changes.
The best use of turnover tax is not to chase the lowest visible rate. It is to align the tax regime with a genuinely small, simple and qualifying business. If the business is complex, high-growth, VAT-dependent or owner-structure heavy, the ordinary tax system may still be the more reliable lane.
Primary sources reviewed: the SARS Turnover Tax page updated April 10, 2026, the SARS Turnover Tax rates page updated February 25, 2026, the SARS Budget 2026 Frequently Asked Questions, the SARS quick test for individuals and companies, and SARS's VAT versus turnover tax examples.
Check VAT Pricing Before You Switch Regimes
Use the AfroTools South Africa VAT calculator to compare VAT-inclusive and VAT-exclusive pricing before deciding whether turnover tax is commercially cleaner.
South Africa VAT Calculator →Frequently Asked Questions
SARS says the qualifying turnover threshold increased to R2.3 million, effective April 1, 2026.
Using the SARS 2026/27 table, R1.8 million falls into the top band: R12,500 plus 3% of R400,000. The result is R24,500.
Yes. SARS says a micro business registered for turnover tax can elect to remain in the VAT system.
No. The business must pass the SARS quick test, including turnover, business form, ownership, partnership and exclusion checks.
SARS lists records of all amounts received, records of dividends declared, and lists of assets costing more than R10,000 plus liabilities above R10,000 at year-end.