Employment Equity Targets 2026: Sector-specific numerical targets, DoEL compliance, EE reporting

The 2026 Budget Speech brings some financial breathing room for South African small and medium-sized enterprises (SMEs). SARS is adjusting key tax elements. These changes can directly impact your business’s cash flow and your employees’ take-home pay.

Understanding these updates is crucial for effective financial planning. They offer opportunities to optimise your tax position. You can also ensure compliance and reduce unexpected costs.

PSS Group is here to help you navigate these complexities. We ensure your business harnesses every advantage offered by the latest tax regulations. Let’s delve into the specific changes and their real-world impact.

Key 2026 Tax Changes and Their Impact

SARS has implemented specific adjustments for the 2026/27 tax year. These changes affect rebates, medical credits, and travel claims. Each adjustment holds direct implications for your business and its employees.

Primary Rebate Increase

The Primary Rebate has increased to R17 820 for the 2026/27 tax year. This means individuals will pay less income tax before their tax liability starts. What this means for your cash flow: Your employees will see a slightly higher net salary. As a business owner, your personal tax burden may also lighten. This can free up capital for reinvestment or operational needs. It offers a tangible benefit to employees, boosting morale and purchasing power.

Medical Tax Credits Adjustment

Medical Tax Credits now stand at R376 per month for the main member. The same R376 applies for the first dependant. Each additional dependant receives R254 per month. What this means for your cash flow: Employees with medical aid receive a fixed reduction in their tax payable. This non-refundable credit directly supports employees managing healthcare costs. For businesses that contribute to employee medical aids, this adjustment provides indirect relief. It makes medical aid more attractive and affordable for staff members. This can be a valuable retention tool for your business.

Reimbursive Travel Rate Update

The deemed reimbursive travel rate has increased to R4.95 per kilometre. This rate applies for business travel where no allowance is paid. It simplifies travel expense claims significantly. What this means for your cash flow: Your business can reimburse employees at a higher, SARS-approved rate. This is done without complex substantiation of actual fuel costs. It reduces administrative burden and ensures fair compensation for business-related mileage. Employees receive a tax-free reimbursement up to this rate. This directly covers their travel expenses. This is particularly beneficial for sales teams or mobile service providers. It offers clear guidelines for both employers and employees.

Scenario Example

Consider an employee earning R30,000 per month in the 2026/27 tax year. With the Primary Rebate of R17,820, this employee benefits directly. Their taxable income is reduced, leading to lower PAYE deductions. If they are the main member on a medical aid, they also receive R376 per month in Medical Tax Credits. This means a direct R4,512 annual reduction in their tax liability. These combined effects put more money directly into their pocket each month. It provides real financial relief to your valued staff.

Action Plan for Businesses

Staying compliant and optimising your tax position requires proactive steps. Implement these actions to leverage the 2026/27 tax changes.

• Review Payroll Systems: Immediately update your payroll software and processes for the 2026/27 tax year. Ensure the new Primary Rebate and Medical Tax Credits are correctly applied. This ensures accurate PAYE calculations for all employees.
• Adjust Provisional Tax Estimates: Business owners should revise their provisional tax calculations. Factor in any personal tax savings from the increased Primary Rebate. This prevents overpayment or underpayment throughout the year.
• Implement Digital Travel Logbooks: Encourage employees to use digital logbook applications. These tools accurately track business kilometres. They simplify claims at the new R4.95/km rate. This reduces administrative load and improves compliance.
• Communicate Changes to Employees: Inform your staff about these updates. Explain how the changes impact their take-home pay and travel reimbursements. Transparency builds trust and helps employees understand their benefits.
• Maintain Meticulous Records: Keep detailed records of all reimbursements, payroll data, and tax-related documentation. Proper record-keeping is vital for SARS audits. It also supports your compliance efforts.
• Consult with a Tax Advisor: Engage with tax professionals like PSS Group. We can help you navigate complex scenarios. We also ensure full compliance and maximise tax efficiency for your unique business needs.

Frequently Asked Questions

Who benefits most from these 2026/27 tax changes?

These changes primarily benefit individual taxpayers and small businesses. Middle-income earners receive relief from the increased Primary Rebate. Employees with medical aid also benefit from higher tax credits. Businesses with mobile staff gain from clearer travel reimbursement rules.

Do I need to resubmit anything for these changes to apply?

No, your payroll system should automatically apply the new Primary Rebate and Medical Tax Credits. Ensure your payroll software is updated for the 2026/27 tax year. For travel, simply apply the new R4.95/km rate for reimbursements from March 2026 onwards.

How does the R4.95/km rate apply if I pay a travel allowance?

The R4.95/km rate applies specifically to *reimbursive* travel, not travel allowances. If you pay a travel allowance, employees must keep a detailed logbook. They then claim actual business travel expenses against this allowance during their annual tax return. The deemed rate is for when no allowance is paid and actual costs are not tracked.

Navigating tax changes can be complex, but with the right guidance, your business can thrive. PSS Group is committed to helping South African SMEs achieve financial success. Contact us today for personalised advice and support.