Staying on top of tax developments is not always easy, especially when updates span legislation, budget proposals, case law, and evolving SARS guidance. That is why Johan Kotze, Tax Executive at Shepstone & Wylie Attorneys, compiles this quarterly update. The first quarter of 2026 is heavily shaped by the national Budget, with a strong focus on inflation relief, structural adjustments, and closing gaps in existing tax rules. Here is what you need to know.
Budget 2026: The Big Picture
The 2026 Budget introduces a range of adjustments aimed at easing the impact of inflation on taxpayers for the first time since the 2023/24 cycle.
Key changes include updated personal tax brackets, increased rebates, and higher tax thresholds. These adjustments effectively provide modest relief by preventing “bracket creep” as incomes rise with inflation.
On page 5–6 of the update, personal income thresholds and rebates are all increased, with the primary rebate rising and the tax-free threshold moving upward.
At a broader level, government is also revisiting multiple thresholds across the system, including VAT registration, capital gains tax exclusions, and retirement-related limits.
Major Threshold and Limit Changes
One of the most significant themes this quarter is the resetting of long-standing thresholds, many of which had not been updated for over a decade.
On pages 6–8, several major proposals stand out:
- VAT compulsory registration threshold increasing from R1 million to R2.3 million
- Turnover tax threshold also increasing to R2.3 million
- Voluntary VAT registration threshold rising to R120,000
- CGT small business disposal exclusion increasing to R15 million
- Primary residence exclusion increasing to R3 million
- Annual CGT exclusion increasing to R50,000
There are also notable increases in retirement and savings limits, including higher tax-free investment caps and retirement contribution deductions.
For business owners and SMEs, these changes materially shift planning thresholds and could reduce compliance burdens for smaller operators.
Business, International and Sector-Specific Proposals
The Budget also introduces targeted reforms across several sectors.
Special Economic Zones (SEZs)
Government is reconsidering strict anti-avoidance rules that previously limited SEZ effectiveness. A more practical, market-value-based approach is proposed to prevent profit shifting while improving usability.
Collective Investment Schemes
A major policy direction is emerging: taxing returns from regulated investment funds as capital rather than income, aimed at encouraging savings and improving certainty.
Online Gambling Tax
A proposed 20% tax on gross online gambling revenue is under consultation, signalling potential expansion of the tax base into digital sectors.
International Tax
Technical amendments are proposed to resolve currency translation issues involving controlled foreign companies (CFCs) and foreign-functional-currency taxpayers, reducing distortions in reported income.
Individuals, Trusts and Estate Planning
Several proposals directly affect individuals and high-net-worth planning structures.
A key anti-avoidance measure targets donations between spouses where one spouse ceases tax residency. The exemption will be limited to donations where the receiving spouse remains a resident, closing a commonly used planning gap.
Other important changes include:
- Allowing rollover of capital allowances on assets transferred between spouses
- Extending eligibility for medical scheme tax credits in certain cases
- Clarifying rules for living annuity de minimis thresholds, ensuring limits apply cumulatively per fund or insurer
These changes reinforce a clear direction: reducing loopholes while tightening the integrity of personal tax structures.
VAT and Administrative Changes
VAT and tax administration reforms are a major focus this quarter, with several practical implications.
Key proposals include:
- Clarifying that services must be physically rendered in a customs-controlled area to qualify for zero-rating
- Repealing complex rules around gold supply to banks due to compliance challenges
- Tightening rules on notional input tax for second-hand goods
- Making intermediaries the default party responsible for VAT on electronic services
Administrative reforms are equally significant:
- Removing the distinction between eFilers and non-eFilers, standardising deadlines
- Expanding documentation requirements for second-hand goods
- Allowing banks to pre-screen tax refunds to reduce fraud and speed up legitimate payments
- Tightening provisional tax rules, including payment requirements and increased thresholds
These changes indicate a continued push toward automation, compliance visibility, and fraud prevention.
Tax Cases: Key Themes
The quarter includes several important court decisions, particularly in the mining and royalty space.
In Richards Bay Mining (Pty) Ltd v C:SARS, the court confirmed that mineral royalties must be calculated on an aggregated basis, rejecting SARS’ attempt to apply a per-mineral approach.
In Aspasa NPC and Others v C:SARS, the court dealt with the interpretation of “bulk” in relation to aggregates, ultimately recognising that the issue had industry-wide implications and justified High Court intervention.
A consistent theme across cases is the importance of substance, statutory interpretation, and clarity in legislative intent.
Interest Rates Update
Interest rates on outstanding taxes decreased slightly again, with the rate dropping to 10.25% from 1 March 2026.
Similarly, interest on overpayments declined, continuing the broader trend of easing rates.
Take Action
The first quarter of 2026 signals a shift toward system-wide recalibration rather than isolated changes.
There are three clear takeaways:
- Threshold increases create immediate planning opportunities
- Anti-avoidance rules are tightening, particularly for individuals and cross-border structures
- SARS continues to strengthen enforcement through administrative reform and clearer rules
If you operate a business, manage investments, or structure assets across entities or jurisdictions, now is the time to review your position against these changes.
Download the full update below for a detailed breakdown of all developments this quarter, and get in touch if you would like help applying these changes in practice.