By André Lubbe – Certified Financial Planner

Updated 1 Sept 2025

Turnover Tax in South Africa (2024/2025) – Who Qualifies?

Learn what turnover tax is, who qualifies in South Africa, 2024/2025 rates, benefits, downsides, and how to register with SARS.

Navigating South Africa’s tax landscape can be overwhelming for small business owners. Between VAT, income tax, and compliance requirements, many entrepreneurs feel weighed down before they even issue their first invoice.

Fortunately, the South African Revenue Service (SARS) introduced turnover tax, a simplified tax system designed specifically for micro businesses.

This guide explains what turnover tax is, who qualifies, the 2024/2025 tax rates, pros, and cons, and how to register.

What Is Turnover Tax?

Turnover tax is a simplified tax system for small businesses in South Africa. Instead of calculating taxable income and claiming expenses, businesses pay tax as a fixed percentage of their gross turnover.

• Turnover = total sales or income before expenses.
• SARS ignores deductions like rent, salaries, and operating costs.

This system was designed to reduce the compliance burden, making it easier for very small businesses to stay tax-compliant.

Who Qualifies for Turnover Tax?

Not every small business qualifies. SARS sets out specific criteria:

1. Annual Turnover Limit

• Maximum R1 million per year.
• Measured on gross sales (before expenses).

2. Eligible Entities

• Sole proprietors.
• Partnerships.
• Close corporations.
• Private companies.
• Co-operatives.

3. Excluded Businesses

Even if turnover is under R1 million, some businesses cannot register:

• Certain professional services (lawyers, accountants, auditors, architects, engineers).
• Businesses earning over 20% from investments (rental income, interest, dividends).
• Personal service providers (mainly serving one client).
• Businesses with shareholders who are not natural persons (with limited exceptions).

SARS Turnover Tax Rates (2024/2025)

For the year ending 29 February 2025, the SARS turnover tax table is:

• 0 – R335,000 turnover → 0% tax
• R335,001 – R500,000 turnover → 1% of turnover above R335,000
• R500,001 – R750,000 turnover → R1,650 + 2% of turnover above R500,000
• R750,001 – R1,000,000 turnover → R6,650 + 3% of turnover above R750,000

This sliding scale ensures the smallest businesses pay very little, while those closer to the R1 million cap contribute more.

Benefits of Turnover Tax

1. Simplicity – No need to track detailed expenses or complicated tax returns.
2. Lower Compliance Costs – Less reliance on accountants and bookkeeping.
3. Cash Flow Friendly – Predictable tax based on turnover, not profit.
4. One Tax Replaces Many – Covers income tax, VAT (under the threshold), capital gains tax, and provisional tax.

Downsides of Turnover Tax

1. No Expense Deductions – Businesses with high costs could pay more tax.
2. Turnover Cap – Exceed R1 million, and you fall out of the system.
3. Limited Flexibility – Not suitable for fast-growing or high-expense businesses.

How to Register for Turnover Tax

• Complete form TT01 (on SARS eFiling or at a branch).
• Submit before 31 March of the tax year.
• SARS confirms your registration.

👉 Registration is voluntary and must be done at the start of a tax year (1 March).

Practical Example

A small bakery earns R600,000 turnover per year:

• Turnover tax = R1,650 + 2% of (R600,000 – R500,000)
  = R1,650 + R2,000
  = R3,650 total tax.

Under the normal system, the bakery would need to calculate net profit, file returns, and possibly pay more.

Should You Choose Turnover Tax?

Turnover tax is best suited for:

• Low-expense businesses.
• Sole proprietors and traders.
• Entrepreneurs valuing simplicity.

It may not suit:

• High-overhead businesses.
• Fast-growing companies likely to exceed R1 million.
• Professionals excluded by SARS.

FAQs About Turnover Tax in South Africa

1. Can I register for turnover tax mid-year?
No, registration must happen at the start of the tax year (before 31 March).

2. Does turnover tax replace VAT?
Yes, for businesses under the VAT threshold, turnover tax replaces VAT.

3. What happens if my turnover exceeds R1 million?
You must deregister and join the standard tax system from the next financial year.

Final Thoughts

Turnover tax offers South African micro businesses a simple, cost-effective way to stay compliant with SARS. If your turnover is under R1 million, your expenses are low, and you value simplicity, turnover tax could save you time and money.

However, if your business has high expenses or is scaling quickly, the standard tax system may be more beneficial. Always seek advice from a qualified tax practitioner before making your decision.