Turnover tax replaces income tax, VAT, provisional tax, capital gains tax and dividends tax with a single tax calculated on your turnover rather than your profit. From 1 April 2026 it is available to businesses with annual turnover up to R2.3 million, with the first R600,000 taxed at 0%. Because it is charged on sales regardless of whether you made a profit, it is excellent for high-margin businesses and potentially far worse for low-margin ones.
The threshold more than doubled in Budget 2026, from R1 million to R2.3 million — the first change since 2009 — which brought a large number of businesses into scope for the first time.
The 2026/27 rates
| Taxable turnover | Rate |
|---|---|
| R0 – R600,000 | 0% |
| R600,001 – R950,000 | 1% of the amount above R600,000 |
| R950,001 – R1,400,000 | R3,500 + 2% of the amount above R950,000 |
| R1,400,001 and above | R12,500 + 3% of the amount above R1,400,000 |
What changed on 1 April 2026:
Annual turnover limit: R1 million → R2.3 million
The 0% band: R335,000 → R600,000
The restriction on tax year-end dates was removed
A business turning over R600,000 now pays no turnover tax at all.
What it replaces
This is the part that makes it genuinely simpler, not just cheaper.
Turnover tax replaces:
Income tax
Provisional tax
Capital gains tax
Dividends tax
Secondary tax on companies
It does not replace:
VAT — you can be registered for both. They are separate systems
PAYE, UIF and SDL if you employ anyone
CIPC obligations — annual returns, beneficial ownership, financial statements
The break-even: margin decides everything
Because turnover tax is charged on sales and normal tax on profit, your margin determines which is cheaper.
High margin — turnover tax wins comfortably
A consultant turning over R700,000 with R150,000 of costs, so R550,000 of profit.
| Turnover tax | Small Business Corporation | |
|---|---|---|
| Base | R700,000 turnover | R550,000 profit |
| Calculation | 1% × R100,000 | R18,620 + 21% × R185,000 |
| Tax | R1,000 | R57,470 |
Turnover tax saves R56,470.
Low margin — turnover tax loses badly
A retailer turning over R2,000,000 with R1,850,000 of costs, so R150,000 of profit.
| Turnover tax | Small Business Corporation | |
|---|---|---|
| Base | R2,000,000 turnover | R150,000 profit |
| Calculation | R12,500 + 3% × R600,000 | 7% × R51,000 |
| Tax | R30,500 | R3,570 |
Turnover tax costs R26,930 more — and it is payable even in a year the retailer makes a loss.
The rough rule
The higher your margin, the better turnover tax looks. Service businesses with low input costs generally benefit. Businesses buying and reselling stock generally do not.
Do the calculation on your own numbers before electing. The gap runs in both directions and it is substantial.
Who cannot use it
The exclusions are broad, and they rule out a great many businesses that would otherwise benefit most.
You do not qualify if:
Turnover exceeds R2.3 million in the year of assessment
More than 20% of total receipts come from rendering professional services — accounting, auditing, actuarial, architecture, consulting, engineering, legal, management services, medical and similar
More than 20% of receipts come from investment income — interest, dividends, rental of immovable property, royalties, annuities
You are a personal service provider or labour broker
Any shareholder or member is not a natural person
The business holds shares in a company other than a listed company, or in certain other prescribed entities
You previously registered and were deregistered from the regime
The professional services exclusion is the one that surprises people. A consultant earning more than 20% of receipts from consulting is excluded — which removes exactly the high-margin service businesses for which the arithmetic works best.
Read that exclusion carefully against your own activities, because the definition of professional services is broad and the 20% test is on receipts, not profit.
How to register
Registration is optional. You elect into the regime.
Where to register: through the SARS Online Query System.
When:
| Situation | Deadline |
|---|---|
| New business | Within two months of starting to trade |
| Existing business | Before the start of a new tax year |
That timing rule matters. You cannot decide in November to be on turnover tax for the year already running. It is a decision for the year ahead.
How you pay
Two payments a year plus a final return.
| Return | When | What it is |
|---|---|---|
| TT02 — first payment | Six months into the tax year | Interim payment based on estimated turnover |
| TT02 — second payment | End of the tax year | Second interim payment |
| TT03 — final return | After year end | Final return reconciling the year |
Considerably simpler than the alternative, which is two IRP6 provisional returns plus an ITR14 built from full annual financial statements and a tax computation.
The other advantages, and the catch
Genuinely simpler. One tax, calculated on a number you already know. No tax computation reconciling accounting profit to taxable income, no wear and tear schedules, no assessed loss tracking.
Lower compliance cost. Meaningfully cheaper to administer than a full ITR14 with financial statements.
No CGT or dividends tax. Selling a business asset does not produce a separate capital gains calculation, and taking money out does not attract 20% dividends tax.
The catch: you still need proper records. Turnover tax simplifies the tax, not the bookkeeping. You must be able to substantiate your turnover, and SARS can verify it.
The second catch: it is payable in a loss year. A business on normal tax pays nothing when it loses money. A business on turnover tax pays on its sales regardless.
Turnover tax and VAT together
You can be registered for both. They are separate systems and being on turnover tax does not prevent VAT registration, voluntary or compulsory.
Note the coincidence of thresholds. Both the turnover tax limit and the compulsory VAT registration threshold now sit at R2.3 million, which means a growing business tends to hit both at the same moment — leaving turnover tax and entering compulsory VAT in the same year.
See the VAT registration threshold.
Should you switch?
Turnover tax is likely better if:
Margin above roughly 40%
Turnover comfortably under R2.3 million
Not caught by the professional services or investment income exclusions
You value simplicity and lower compliance cost
Consistently profitable
Normal tax with SBC rates is likely better if:
Margin under roughly 25%
You carry stock
Profitability is variable, with loss years
You are approaching R2.3 million
You qualify as a Small Business Corporation
See what is the company tax rate in South Africa for the SBC comparison.
Run both calculations on your actual numbers. The decision is arithmetic, not preference, and switching back is not immediate — a business deregistered from the regime cannot simply re-enter.
Frequently asked questions
What is turnover tax in South Africa? A simplified tax regime for micro-businesses that replaces income tax, provisional tax, capital gains tax and dividends tax with a single tax calculated on turnover rather than profit. From 1 April 2026 it is available to businesses with annual turnover up to R2.3 million.
Is turnover tax better than company tax? It depends on your margin. High-margin businesses generally pay far less on turnover tax, while low-margin businesses can pay considerably more — and turnover tax is payable even in a loss year. Run both calculations on your own figures before electing.
What are the turnover tax rates for 2026/27? 0% up to R600,000, then 1% of the amount above R600,000 to R950,000, R3,500 plus 2% above R950,000 to R1,400,000, and R12,500 plus 3% above R1,400,000.
Who cannot register for turnover tax? Businesses with turnover above R2.3 million, those earning more than 20% of receipts from professional services or from investment income, personal service providers and labour brokers, entities with a shareholder who is not a natural person, and businesses holding shares in unlisted companies.
Can I be registered for both turnover tax and VAT? Yes. They are separate systems, and being on turnover tax does not prevent VAT registration either voluntarily or because you exceed the compulsory threshold.
How do I register for turnover tax? Through the SARS Online Query System. A new business must apply within two months of starting to trade, and an existing business must register before the start of a new tax year.
Do I still need financial statements on turnover tax? Yes, if you are a company. Turnover tax simplifies the tax calculation, not your Companies Act obligations — annual financial statements, CIPC annual returns and beneficial ownership filings all continue.
Do I pay turnover tax if I make a loss? Yes. Turnover tax is charged on sales regardless of profitability, which is the single biggest disadvantage of the regime for businesses with variable results.
Run the numbers before you elect
The difference between turnover tax and SBC rates runs to tens of thousands of rands a year in both directions, and the timing rule means the decision has to be made before the tax year starts rather than after you see the result.
Smartbook models both on your actual figures, checks the exclusions properly — particularly the professional services test — and handles the registration and TT02 and TT03 filings.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Figures are for the 2026/27 year of assessment. The qualifying exclusions are technical and fact-specific — have them assessed against your own activities before electing. Worked examples are illustrative.
Primary sources: SARS — Budget 2026 Frequently Asked Questions · SARS — Small Businesses Taxpayers · SARS Online Query System — Turnover Tax · SARS — Tax Rates