Insight: South African micro-businesses that previously exceeded the Turnover Tax limit may now qualify under the increased R2.3 million annual turnover threshold. SARS states that the revised threshold applies from 1 April 2026, while the tax-free turnover band has increased to R600 000. Businesses should not switch regimes based on turnover alone: the decision should also consider margins, input costs, VAT, customer expectations and future growth.

According to SARS’s current Turnover Tax guidance, the regime is available to qualifying individuals, partnerships, close corporations, companies and co-operatives with annual turnover of R2.3 million or less. SARS’s Budget 2026 frequently asked questions confirm that the higher threshold took effect on 1 April 2026.

What changed for micro-businesses?

The previous R1 million qualifying threshold has been increased to R2.3 million. SARS also lists a 0% Turnover Tax rate on taxable turnover up to R600 000 for the 2026/27 year of assessment, followed by graduated rates above that level. The regime calculates tax on taxable turnover rather than accounting profit.

This can simplify compliance for eligible businesses because the system is designed around turnover and has reduced record-keeping requirements. SARS says businesses must still retain records of amounts received, dividends declared, and certain higher-value assets and liabilities.

Who should review their position?

The change is particularly relevant to businesses that earned between R1 million and R2.3 million during the relevant period, as well as smaller businesses currently using the standard income-tax system. A business that qualifies is not automatically better off under Turnover Tax. A low-margin business with substantial operating expenses may need to compare the tax outcome carefully, because Turnover Tax is based on sales rather than profit.

Businesses should also consider their VAT position. SARS confirms that Turnover Tax and VAT are separate systems and that a Turnover Tax business may elect to remain VAT-registered. The VAT registration threshold was also increased to R2.3 million from 1 April 2026, but registration decisions should take account of taxable supplies, customer requirements and the ability to claim input tax.

Checks to complete before making a change

  • Reconcile total taxable turnover for the past 12 months and prepare a realistic forecast.
  • Separate turnover from non-business receipts and confirm which amounts must be included.
  • Compare Turnover Tax with standard income tax using actual gross margins and operating costs.
  • Review whether customers expect VAT invoices or prefer dealing with VAT-registered suppliers.
  • Check the business’s legal structure, ownership and activities against the applicable qualification rules.
  • Confirm the relevant tax-year timing before applying or switching regimes.

Practical next steps

Start with a side-by-side calculation using the business’s latest management accounts, not only its bank deposits. Document the assumptions, including expected sales, cost of goods, salaries, rent and professional fees. If the result is unclear, obtain professional advice before changing the business’s tax registration or pricing.

SARS says Turnover Tax registration is available through its Online Query System. Businesses can also review the official quick test and micro-business guidance before proceeding. For broader support with tax registrations, bookkeeping and management reporting, explore Your Financial Partner’s accounting services.