For a very small, low-margin business, calculating tax on turnover rather than profit can be simpler, but it isn't automatically cheaper. A business with high expenses relative to its turnover could end up paying more tax under turnover tax than under normal income tax rules, because expenses aren't deducted. It's a decision worth checking with a tax practitioner rather than assuming "simpler" always means "less tax."
Source: SARS
Frequently Asked Questions
Which businesses qualify for Turnover Tax?
Registered micro businesses (sole proprietors, partnerships, and certain companies) with a qualifying annual turnover, generally up to R1 million.
Does Turnover Tax replace VAT as well?
A registered micro business can also elect simplified VAT reporting, though this is a separate election from Turnover Tax itself.
Is Turnover Tax always the cheaper option for a small business?
Not necessarily — businesses with high deductible expenses relative to turnover may pay less under standard income tax, so it's worth comparing both before opting in.