SARS Diesel Refund: Who Qualifies and How to Claim in 2026

To qualify for a SARS diesel refund in South Africa, a business must be registered for VAT and perform eligible primary activities in sectors like agriculture, mining, forestry, or fishing. The refund is a rebate on the General Fuel Levy and Road Accident Fund (RAF) levy included in the price of diesel purchased for specific non-road use. Claims are submitted via the VAT201 return on eFiling using the dedicated diesel refund section.

Fuel costs represent one of the most significant overheads for industrial and primary production businesses in South Africa. As we move through the 2026 tax year, understanding the mechanics of the SARS diesel refund is no longer just a 'nice-to-have'—it is a critical cash flow strategy for SMEs. Many small business owners leave thousands of Rands on the table because they find the compliance requirements daunting. This guide simplifies the process, ensuring your business recovers every cent it is legally entitled to.

What is the SARS diesel refund system?

The SARS diesel refund is a tax incentive designed to provide financial relief to specific industries that use diesel for heavy machinery and primary production rather than on public roads. It allows businesses to reclaim a portion of the Fuel Levy and the Road Accident Fund (RAF) levy. Because these businesses use diesel in off-road environments (like farms or mines), they are partially exempted from contributing to road maintenance and accident funds through their fuel spend.

This system is governed under the Customs and Excise Act. It is important to note that this is not a refund of the VAT paid on diesel, which is claimed separately as input tax. Instead, it is a specific rebate linked to the levies that make up the total pump price. For the 2025/2026 period, the rebate rates are adjusted according to the National Budget, making it essential to keep accurate records of every litre purchased.

Who qualifies for the SARS diesel refund in South Africa?

To qualify for the SARS diesel refund, a person or entity must be registered for VAT and engaged in 'qualifying primary activities.' These include commercial fishing, farming, forestry, mining, and certain offshore vessels or rail operations. Small businesses must be able to prove that the diesel was used specifically for these industrial purposes and not for standard road transport.

Qualifying industries and activities

1. Agriculture: This covers crop spraying, harvesting, and livestock management. The diesel must be used in tractors, harvesters, or stationary engines used for farming operations.

2. Mining: This includes the extraction of minerals and quarrying. Heavy earthmoving equipment and on-site processing machinery are the primary consumers here.

3. Forestry: Activities related to the planting, maintaining, and harvesting of commercial forests qualify.

4. Fishing and Marine: Commercial fishing vessels and certain coastal shipping operations can claim based on their high consumption of marine diesel.

5. Rail and Electricity Generation: While less common for SMEs, businesses operating private rail sidings or using diesel for large-scale power generation (excluding standard backup generators for offices) may qualify.

What about backup generators?

There has been significant debate regarding diesel used for generators during load shedding. Currently, the SARS diesel refund for food manufacturers was temporary and specific. For the general SME, diesel used in a standard office generator to keep the lights on during power outages generally does not qualify under the permanent primary production scheme. Always check the latest SARS Practice Note or consult with a tax professional to see if any temporary relief measures have been extended into 2026 for your specific sector.

How much can you claim back on diesel?

The amount you can claim back depends on the current Fuel Levy and RAF levy rates set by the Minister of Finance. Typically, the refund covers 40% of the Fuel Levy and 100% of the RAF levy for eligible purchases. These rates are subject to change during the annual February Budget Speech, so the 2026 rates may differ slightly from previous years.

For example, if the total reef price of diesel is R22.00, a significant portion of that is tax. By claiming the rebate, a commercial farmer might reduce their effective cost per litre by several Rands. Over a year of heavy harvesting, this can equate to a R100,000+ boost to bottom-line profit. SARS requires that the refund be calculated based on the quantity of diesel used for qualifying activities only, excluding any diesel used in 'non-qualifying' ways, such as in a manager’s bakkie used on public roads.

How to register for the SARS diesel refund?

Before you can claim, you must be registered as a 'user' under the diesel refund scheme. This is done through the SARS Customs division. You must already be registered for VAT (Value Added Tax) to be eligible. The registration process involves submitting form VAT101D along with your standard VAT registration or as an update to your existing profile via eFiling.

SARS will require proof of your business activity. For a farmer, this might include a lease agreement for farmland or a title deed. For a mining operation, a mining right or permit is mandatory. It is vital that your business description at the CIPC and SARS matches the activity for which you are claiming. If you are registered as a 'General Retailer' but try to claim for 'Mining,' SARS will likely flag your application for an audit immediately.

What records do you need to keep for a diesel refund claim?

SARS requires meticulous record-keeping, often referred to as a 'Logbook' system, to justify every litre of diesel claimed. You must maintain a detailed trail from the point of purchase to the point of consumption. Failure to provide these records during a SARS audit will result in the refund being disallowed and potential penalties being applied.

Mandatory documentation includes:

1. Purchase Invoices: Tax invoices must clearly show the date, the volume of diesel (litres), the price, and the name of the supplier. The invoice must be made out to the registered business entity.

2. Delivery Notes: If diesel is delivered to a bulk tank on-site, you must keep all delivery notes.

3. Logbooks: This is the most critical document. It must record the date of usage, the specific vehicle or machinery used (e.g., Tractor #4), the hours worked or kilometres covered, and the quantity of diesel dispensed from your storage tank.

4. Storage Records: If you have a bulk tank, you must keep a record of dips (measuring the fuel level) to reconcile the amount purchased versus the amount used.

Many small businesses struggle with the manual nature of logbooks. Using an automated fuel management system or integrated accounting software like Smartbook can help track these expenses more accurately, making the year-end or bi-monthly claim process much smoother.

How do you submit a SARS diesel refund claim?

You submit the claim as part of your regular VAT201 return on SARS eFiling. There is a specific section on the return for the 'Diesel Refund.' You will enter the total litres purchased and used for qualifying activities during that tax period. The eFiling system then calculates the Rand value of the refund based on the prevailing rates.

Step-by-step submission process:

1. Log in to SARS eFiling and navigate to your VAT201 return for the current period.

2. Locate the 'Diesel Refund' section (usually near the end of the return).

3. Enter the litres for each category (e.g., Agricultural, Mining).

4. The system will automatically calculate the refund amount which will be offset against any VAT you owe or added to your VAT refund.

5. Keep your supporting documents ready, as SARS frequently selects diesel refund claims for verification before paying out the credit.

Common mistakes when claiming the diesel refund

One of the most frequent errors is claiming for diesel used in luxury vehicles or road-going transport. The law is very specific: the diesel must be used in equipment performing the primary activity. If you use the same diesel tank for your delivery trucks and your tractors, you must have a clear way to distinguish between the two. You can only claim for the tractor usage.

Another mistake is lack of reconciliation. SARS expects the 'Opening Stock + Purchases - Closing Stock' to equal the amount you are claiming to have used. If these numbers don't add up, your claim will be rejected. Additionally, ensure that your invoices are 'Tax Invoices' that comply with Section 20 of the VAT Act. Pro-forma invoices or simple receipts are not sufficient for a successful claim.

Why does the SARS diesel refund audit happen so often?

SARS considers the diesel refund a high-risk area for fraud. As a result, many first-time claimants and businesses with fluctuating claim amounts are often flagged for a 'Relevant Material Request.' This is essentially a mini-audit where you must upload your logbooks and invoices to eFiling.

To pass these audits, your documentation must be organized. If your logbooks appear to have been written all at once in the same pen (indicating they weren't kept daily), SARS may view them with suspicion. Digital records and real-time data entry are highly recommended. If you have clear, contemporary records, these audits are usually resolved quickly, and your refund is released without issue.

Managing your business taxes with Smartbook

Navigating the complexities of the SARS diesel refund requires precision, regular record-keeping, and a deep understanding of South African tax law. For small business owners in the agricultural, mining, or forestry sectors, managing these claims manually can take hours away from core operations. This is where modern accounting technology becomes an asset rather than an expense.

Smartbook is designed specifically for the South African small business environment. Our platform helps you track every expense, categorize your fuel purchases correctly, and maintain the digital paper trail required for SARS compliance. With Smartbook, you can simplify your VAT201 preparation, ensuring that when it comes time to claim your diesel refund, all the data you need is at your fingertips. By automating the 'boring' parts of bookkeeping, we empower you to focus on what you do best: growing your South African business.

Whether you are a sole trader with a single tractor or an SME with a fleet of mining equipment, the SARS diesel refund is a valuable tool to keep your business competitive. Start documenting your fuel usage today, ensure your registrations are in order, and use Smartbook to keep your finances in peak condition for the 2026 tax year.