One of the biggest tax benefits of running a business is being able to claim deductions on expenses and legitimately reduce your tax bill each year. 

But if you’re dealing with a lot of small or variable expenses, keeping track of all your deductions can be a headache.

Fortunately, eligible micro businesses in South Africa can simplify their business expenses and do away with expense receipts by choosing to pay what’s known as ‘turnover tax’. 

In this article, you will learn:

• What is turnover tax?
• Who is eligible for turnover tax?
• What is a micro business in South Africa?
• Will I pay less tax with turnover tax?
• What if I have a lot of business expenses?
• How do I register for turnover tax?
• When is turnover tax due?
• Do I need to keep receipts if I pay turnover tax?
• Stay organised for tax time with QuickBooks Online

What is turnover tax?

Turnover tax is a simplified tax rate designed to reduce administrative burdens for micro-businesses in South Africa with an annual turnover of less than R1 million. It replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax, and Dividends Tax.

This tax is calculated by applying a flat rate based on the business's turnover. The calculation includes an estimate of business expenses, eliminating the need for businesses registered for turnover tax to manually track and report their tax-deductible expenses.

What is a micro business in South Africa?

For the purposes of turnover tax, a micro business (also known as a micro enterprise) is a business with an annual turnover of less than R1 million. This means if you own a business and your turnover is less than R1 million in any tax season, you may be eligible to register for turnover tax.

Will I pay less tax with turnover tax?

In many cases, micro-business owners pay less tax under the turnover tax system than the standard tax system. Depending on your turnover, you may not have to pay tax at all.

For the 2024-2025 tax season, the minimum tax thresholds are: 

• Standard micro-business minimum taxable income: R83,100
• Turnover tax minimum taxable income: R335,000 

In other words, with turnover tax, you don't have to pay any tax until your turnover exceeds R335,000 in a financial year. This threshold is much higher than the minimum threshold of R83,100 under the standard tax system.

What if I have a lot of business expenses? 

Business expenses are automatically estimated under the turnover tax system based on the typical expenditure of a micro business.  

If you have very high tax-deductible expenses that would reduce your taxable income significantly, it may be more tax-effective to claim them under the standard tax system. It’s a good idea to crunch the numbers in both scenarios and compare the difference, or talk to an accountant about what’s best for your situation.

How do I register for turnover tax

To register for turnover tax, you’ll need to: 

1. Do a quick test on the SARS website to see if you quality for turnover tax
2. Fill in TT01 form:

• TT01 – Application for Turnover Tax form (Manual completion)
• TT01 – Application for Turnover Tax form (Online completion)

When is turnover tax due? 

There are three payment dates for turnover tax:

1. The first payment is due in the middle of the tax year on the last business day of August (i.e. 28 August 2024).
2. The second payment is due at the end of the tax year on the last business day of February (i.e. 28 February 2025).
3. The final payment is due after your annual turnover tax return is submitted and processed. This is in line with the submission of the annual income tax returns, between 1 July and 31 January of the following year.

Do I need to keep receipts if I pay turnover tax?

You don’t need to keep receipts if you pay turnover tax, as your business expenses will be automatically calculated as part of your tax rate. However, tracking expenses regularly is important for managing your finances effectively and maintaining positive cash flow – so it’s a good practice to do so anyway.

With QuickBooks, it’s easy to capture receipts and track expenses and turnover throughout the year. Try it free for 30 days (no credit card required)!

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