What is it?
Turnover tax is a simplified tax system aimed at making it easier for micro businesses to comply with their tax obligations. The turnover tax system replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax. A micro business that is registered for turnover tax can, however, choose to remain in the VAT system as from 1 March 2012.
Turnover tax is worked out by applying a tax rate to the taxable turnover of a micro business. The rates are as follows for 1 April 2014 to 31 March 2015.
|R0 - R150,000
|R150,001 - R300,000
||1% of each R1 above R150,000|
|R300,001 - R500,000
||R1,500 + 2% of the amount above R300,000|
|R500,001 - R750,000
||R5,500 + 4% of the amount above R500,000|
|R750,001 and above
||R15,500 + 6% of the amount above R750,000|
To take account of the typical expenses incurred by a micro business and to eliminate the need for detailed recordkeeping of deductible tax expenses, the turnover tax rates are significantly lower than the tax rates under the standard tax system.
The following will assist with regard to record keeping:
For more information on turnover tax, see the following:
Who is it for?
Turnover tax is available to qualifying individuals (sole proprietors), partnerships, close corporations, companies and co-operatives with an annual qualifying turnover of R1 million or less. Specific reasons can disqualify you from the turnover tax system. These can be found in paragraph 3 of the Sixth Schedule to the Income Tax Act.
What steps must I take?
To register for Turnover tax a TT01 form
must be filled in and sent to SARS. The registration application should be sent before the beginning of a year of assessment (a year of assessment runs from 1 March to 28 February), or a later date that may be determined by the Commissioner in a Government Notice. Should a new micro business start trading activities during a year of assessment and wishes to register for turnover tax, an application must be sent within two months from the date that business activities started. Existing micro businesses can register for / switch to turnover tax before the start of a new tax year
You can send the completed form to your nearest branch
or by post to:
SARS Revenue Branch Office
PO Box 1003
SARS will send a letter to you telling you about the outcome of the application. Where the submitted TT01 form is incomplete, the taxpayer will be notified and the application will be re-considered once all of the information has been provided.
A person may elect to voluntary de-register before the beginning of a year of assessment or a later date announced by the Commissioner in a Government Notice. You may be forced to deregister if your turnover exceeds R1million for a given tax year or certain qualifying criteria is no longer met (paragraph 3 of the Sixth Schedule). In the case of a compulsory deregistration, the business will be deregistered from the beginning of the month following the month during which they no longer qualify for turnover tax.
Top Tip: If a person has been deregistered (voluntary or compulsory) from turnover tax, they may not be registered as a micro business again.
When must it be paid?
Two interim payments, the first in the middle of the tax year (31 August) and the second at the end of the tax year (28/29 February) must be made based on the estimated turnover of the business for that tax year.
After the end of the tax year, a turnover tax return (TT 03) that reflects the actual taxable turnover of the business must be completed. Any shortfalls / overpayments then become payable / refundable. The Payment Advice will help with this and other matters relating to payments.
What records should be kept by a micro business registered for turnover tax?
A major benefit of turnover tax is the reduced record-keeping requirements. The following records should be kept:
- Records of all amounts received;
- Records of dividends declared;
- A list of each asset with a cost price of more than R10,000 on hand at the end of the year of assessment as well as of liabilities exceeding R10,000.
How should it be paid?
Besides the two interim payments, a Turnover Tax Return (TT 03)
must be submitted annually to SARS by a specific due date that is be announced by SARS as part of its annual Filing Season campaign. The completed return can be handed in or posted to the nearest SARS branch office