New National Minimum Wage March 2026: R30.23 per hour, domestic worker rates, non-compliance penalties

The South African Revenue Service (SARS) brings some welcome news for small to medium-sized enterprises (SMEs) with the 2026/27 Budget. Crucially, there are no increases to the corporate or individual income tax rates. This stability is a significant relief for businesses facing ongoing economic pressures. Instead, SARS is making inflationary adjustments to key tax components. These changes aim to ease the tax burden slightly, effectively putting more money back into the pockets of business owners and their employees.

Every Rand counts for SMEs navigating a challenging economic landscape. The 2026/27 tax adjustments, while not revolutionary, offer practical benefits. By increasing rebates, medical tax credits, and reimbursive travel rates, the government acknowledges the rising cost of living. This means your business can better manage its payroll and ensure employees retain more of their earnings.

Understanding these shifts is vital for sound financial planning. PSS Group is here to help you unpack these changes. Proactive adjustments to your business’s tax strategy can lead to real savings. Let’s delve into the specifics of what the 2026/27 Budget means for your South African SME.

Key 2026 Tax Changes and Their Impact

The 2026/27 tax year brings specific adjustments designed to provide some relief. These changes directly affect how much tax individuals pay and how businesses manage employee expenses. Keeping track of these updated figures is essential for compliance and financial optimisation.

The primary rebate has increased to R17 820 for the 2026/27 tax year. This means the income threshold before an individual starts paying income tax is higher. For your business, this translates to employees having more disposable income. It also ensures your payroll calculations are accurate against the latest legal requirements. A higher rebate helps more junior or entry-level employees retain a larger portion of their earnings. This can boost employee morale and purchasing power within the economy.

Medical tax credits have also seen an inflationary adjustment. The amount for the first two beneficiaries is now R376 per month. This credit directly reduces an individual’s tax liability if they belong to a medical aid scheme. For your employees, this means a tangible reduction in their overall tax payable. As an employer, ensuring this is correctly reflected in your payroll system is critical. It underscores your commitment to employee well-being and helps them manage rising healthcare costs more effectively.

The reimbursive travel rate has increased to R4.95 per kilometre for the 2026/27 tax year. This rate applies when employees use their private vehicles for business purposes and are reimbursed by the company. The increased rate means your employees can claim a higher tax-free amount for their business travel. This helps cover the rising costs of fuel and vehicle maintenance. Businesses should update their travel policies and ensure employees maintain accurate logbooks. Proper record-keeping is crucial for both employee claims and SARS compliance.

Scenario Example

Consider an employee earning R30,000 per month in the 2026/27 tax year. They are under 65 and have a medical aid for themselves and one dependent. The increased primary rebate of R17 820 immediately reduces their taxable income threshold. Furthermore, their medical tax credit of R376 for themselves and R376 for their dependent (total R752 per month) directly lowers their tax liability. These combined adjustments mean a slightly higher net pay each month for the employee. The business benefits from accurate, compliant payroll. The employee retains more of their hard-earned money. This small but significant shift offers genuine relief in daily budgeting.

Action Plan for Businesses

Proactive steps ensure your business fully benefits from these tax adjustments and remains compliant with SARS. Do not wait until the tax year ends to implement changes. Immediate action is always best.

• Review and Update Payroll Systems: Ensure your payroll software is updated for the 2026/27 tax year. Confirm it reflects the new primary rebate of R17 820. Also verify the updated medical tax credit of R376. Incorrect settings can lead to compliance issues and employee dissatisfaction.
• Adjust Provisional Tax Payments: If you are a provisional taxpayer, reassess your estimated taxable income. Factor in the increased rebates and any other applicable changes. Adjust your provisional tax payments accordingly to avoid penalties or overpayment.
• Communicate with Employees: Inform your employees about the increased medical tax credit and reimbursive travel rate. Explain how these changes benefit them. This transparency builds trust and helps employees understand their pay.
• Optimise Travel Reimbursement Policies: Update your company’s travel policies to reflect the new R4.95/km reimbursive travel rate. Implement or reinforce a strict logbook system for all business travel. Digital logbook tools can simplify this process and ensure accuracy.
• Maintain Meticulous Records: Keep accurate and easily accessible records for all payroll, travel, and medical aid contributions. This includes updated employee details and payment summaries. Good record-keeping is vital for audits and year-end submissions.
• Consult with Tax Professionals: Engage with tax consultants like PSS Group for a comprehensive review of your business’s tax strategy. We can help identify further opportunities for optimisation. We ensure full compliance with the latest SARS regulations.

Frequently Asked Questions

Understanding the implications of these tax changes is crucial for every small business owner. Here are answers to some common questions.

Does this mean my business will pay less tax overall in 2026/27?

For the business itself, corporate income tax rates remain unchanged. However, the inflationary adjustments to individual rebates and medical credits can positively impact your employees’ take-home pay. This indirectly benefits your workforce. It also streamlines your payroll processing by using accurate, updated figures. This ensures compliance, reducing the risk of penalties.

How do I ensure my business benefits from the increased travel allowance?

You must ensure employees maintain accurate, detailed logbooks for all business travel. These logbooks must record dates, distances, destinations, and reasons for travel. Update your internal policies to reflect the R4.95/km rate. Consider digital logbook solutions for easier management and compliance. These tools simplify record-keeping significantly.

Should I adjust my provisional tax payments based on these changes?

Yes, if you are a provisional taxpayer, you should absolutely review your estimated taxable income. Factor in any applicable increases in rebates. This will help you make more accurate provisional tax payments. It ensures you avoid underpayment penalties or overpaying SARS unnecessarily. Consulting a tax professional is highly recommended for this review.