Small business owners looking to sell their business or interest in a business as part of their retirement planning will be glad to know that meaningful tax relief has been provided for them in the 2026 National Budget. Among other measures to support businesses, National Treasury raised the capital gains tax exemption for the sale of a small business for older persons (55+) from R1.8 million to R2.7 million, a long-overdue adjustment for inflation and rising asset values. The higher exemption also applies to more businesses than it did before. Where small businesses used to be defined as those valued at R10 million or less, the limit has been increased to R15 million.

DO I QUALIFY?

First check if you meet the bare minimum requirements:

• The exemption applies to individuals aged 55 or older.
• The exemption applies when disposing of a small business with a market value not exceeding R15 million.
• The market value of all assets, regardless of their nature, must be considered in determining whether the R15 million threshold is exceeded or not.
• Liabilities of the business are ignored for this determination.
• For partnerships or companies, the R15 million threshold applies to the total assets of the business, not each partner or shareholder’s fractional interest. This means a two-partner business with R20 million in assets will not qualify, even if each partner’s share is only R10 million.
• The lifetime CGT exemption is capped at R2.7 million in total across all disposals.
• Each asset must have been held continuously for at least 5 years prior to disposal and the individual that qualifies for the relief had been substantially involved in the operations of the business of that small business during this period.
• The relief must be determined on an asset-by-asset basis.

Given the complexity of this determination and SARS’ requirement that relief must be determined on an asset-by-asset basis, professional tax assistance is highly recommended.

How could it benefit you?

Many small business owners rely on the eventual sale of their business as their primary retirement asset. This tax relief can support succession planning, intergenerational transfers, and smart business exits, particularly for family-owned businesses. It encourages the sale of businesses, effectively unlocking capital and allowing for business continuity or reinvestment into the economy. Of course, the additional tax-free capital gain will also meaningfully boost your retirement security after years of building a business. If you’re considering retiring or selling soon, it’s worth reviewing your timing with a tax advisor. We can assist you in reviewing your business valuation, assessing your CGT exposure and structure and timing your exit correctly to make the most of this meaningful tax exemption.

Most founders track revenue growth. Fewer track where that revenue comes from. Client concentration risk arises when a single customer, or a small cluster of customers, accounts for a disproportionate share of revenue. In some industries it can be natural to have larger customers, especially in business-to-business markets with long-term contracts. But as dependency grows, revenue becomes fragile in ways that aren’t obvious from top-line growth figures. Having many of your eggs in one basket exposes you to sudden revenue shocks if a key client reduces orders, delays payment, or – horror of horrors – ends the relationship. The “40% Rule” is a practical red flag used by bankers, acquirers, and investors: if a small group of clients contribute 40% or more of total revenue, the business carries material concentration risk. This article unpacks why 40% matters, how it influences due diligence, and what business owners can do to reduce exposure without destabilising current income.

Why the 40% threshold matters

The “40% Rule” is not an ironclad regulation, but a pragmatic benchmark widely used in finance, banking, and valuation circles. When one or two clients account for around 40% or more of revenue, credit committees, acquirers, and investors often treat it as a material concentration risk. Above this level, the loss of a single account can eliminate a large portion of expected cash flow, put pressure on fixed costs, and lead to breaches of debt covenants. If you pass the 40% mark, lenders may become cautious or impose stricter terms on financing. This makes sense, as your ability to pay them back is contingent on a relationship they cannot control.

How concentration risk affects business finances

The financial impact of client concentration extends beyond headline revenue figures. Concentrated revenue makes cash flow volatile and forecasting uncertain. One delayed payment or unexpected order reduction from a large client can create immediate cash flow problems, especially where fixed costs such as payroll and rent are significant. Beyond the risk issues, a dominant client can also gain leverage in pricing and contract negotiations, which can erode margins quietly over time.

The strategic and operational side of concentration

This risk can go beyond the pure financials. When one client drives a large share of revenue, internal and external decisions can begin to revolve around that relationship. Product development may align too closely with the needs of your largest client, diverting focus from broader market requirements. Marketing and sales efforts can end up prioritising retention of that client at the expense of diversifying the portfolio.

Market valuation and exit implications

For owners considering a sale or seeking external capital, client concentration can have a significant effect on valuation. Buyers and investors seek predictable, diversified revenue streams. A company with a single client contributing a large share of its revenue is often seen as riskier. The 40% threshold often becomes a pivot point in negotiations. Buyers may discount offers or tie price adjustments to post-acquisition retention of key clients. Similarly, lenders pricing credit facilities take concentration into account. Companies with high concentration may face higher interest rates, tighter covenants, or requirements for collateral. In extreme cases, banks may refuse financing until concentration metrics improve.

Managing and reducing concentration risk

Addressing concentration risk starts with measurement. Your accountant can help you calculate the percentage of revenue each client contributes, as well as the combined share of the top five clients. Monitoring trends over multiple quarters helps identify whether concentration is rising as a natural business outcome or creeping up unnoticed. Strategic actions to reduce concentration are most effective when pursued deliberately and gradually. This could involve targeted business development efforts to land new clients, segment diversification to broaden revenue sources, or pricing strategies that balance revenue concentration without sacrificing profitability. Diversification need not diminish the value of large clients. It’s about strengthening the overall revenue base so that losing any one account does not destabilise the organisation.

Final thoughts

Client concentration risk is a silent strategic threat that often hides behind strong revenue figures. Reaching the 40% threshold can transform a seemingly healthy business into one that is vulnerable to external decisions and internal inertia.

“Invisible work” is the non-value-added tasks that act as a hidden tax on your profit and growth. It is the friction within your business that consumes overheads, mental energy, and time, yet remains entirely imperceptible to your clients. This work is dangerous because at times it can feel like accomplishment, despite being the exact opposite for your bottom line. While you might feel a sense of control after colour-coding a spreadsheet or reorganising a filing system, these activities often provide a false sense of security. They allow you to avoid the harder, more vulnerable work of selling and innovating. To scale effectively, you must ruthlessly audit where your hours go. If a customer wouldn’t pay an extra rand for the specific task you’re performing, it’s likely a drain on your business rather than a pillar of it.

1. Administrative labyrinth
   Administrative overhead is a silent killer of momentum. Small business owners often get lost in a maze of excessive record-keeping and non-essential paperwork. While a certain level of documentation is necessary for legal compliance and basic order, many entrepreneurs often confuse being busy with being productive.  For example, these days it’s possible to create complex tracking systems for data that is never actually analysed and file reports that no one reads. This administrative labyrinth creates a drag on the business. Every hour you spend navigating self-imposed red tape is an hour lost to high-level strategy or direct customer acquisition. Make sure you review your administrative systems periodically with an eye to eliminating unnecessary tasks and driving simplification. Rather focus on the metrics that actually deliver growth.
   
   
2. The over-servicing illusion
   There is a pervasive myth that “going the extra mile” is always beneficial. However, in the world of profitability, over-servicing is an illusion of quality that often leads to margin erosion. Wasting time on extras that customers don’t actually value, care about or pay for is pretty pointless. As Michael E. Gerber points out, “The product is what your customer feels as he walks out of your business.” If the customer does not feel or acknowledge the value of your extra effort, you are effectively paying to work. Trust is built on delivering what was promised consistently, not on adding unrequested flourishes that increase your workload without increasing your price point. If you are struggling to isolate these points in your service, your accountant can help by drawing up a document indicating the costs aligned to each service you offer and give you advice as to which areas may not be delivering on their effort. 
   
   
3. Communication clutter
   Internal communication has become invisible work’s most socially accepted disguise. Endless Slack threads debating terminology, reply-all email chains seeking “alignment”, and recurring status meetings that produce no decisions may all feel collaborative but rarely generate customer-facing results. Research consistently shows that knowledge workers spend a disproportionate share of the workday on internal coordination rather than value creation. For small business owners, this cost is amplified: every hour spent managing internal noise is an hour stolen from selling, building, or serving. It’s vital that you ruthlessly audit your communication habits. If a meeting or message thread doesn’t move a deliverable forward, get rid of it.

Reclaiming your time

To break free from the trap of invisible work, you must pivot your focus toward high-value tasks: sales, strategy, and direct customer engagement. This requires the courage to stop doing the low-value tasks that have become your comfort zone. As the father of modern management, Peter Drucker, emphasized, the focus must first be on doing the right things, and then on doing them well. Reclaiming your time means learning to say no.

Employers are legally required to submit their EMP501 reconciliation with accurate and up-to-date payroll and tax information (including valid Income Tax Reference Numbers) for their employees during the Employer Annual Declaration season that runs from 1 April to end May 2026. This involves submitting an accurate Employer Reconciliation Declaration (EMP501), issuing Employee Tax Certificates [IRP5/IT3(a)s] and, if applicable, a Tax Certificate Cancellation Declaration (EMP601). The submission must further balance across the three elements: monthly EMP201 returns for the period, the payments made to SARS, and the employees’ IRP5/IT3(a)s generated. As such, it provides an important opportunity to correct any errors that may have occurred during the year. Preparing and submitting a correct and complete declaration on time can be technically challenging, especially for larger employers. But you neglect it at your peril, as it is a focus area for SARS and the consequences of non-compliance are many.

SARS focus area

The Annual Employer Reconciliation Declarations is a focus area for SARS, as it not only ensures employer compliance, but also enables SARS to issue individual taxpayers with pre-populated Income Tax Returns (ITR12) and income tax auto-assessments. For this reason, employers can expect ongoing and increased scrutiny from SARS in this regard.

Technical challenges

Submitting a declaration that is correct, complete and on time (before end May) has always been technically challenging. But it just got even harder, as SARS has now upgraded missing or incorrect mandatory Income Tax Reference Numbers from a warning-level defect into a hard-stop submission defect when completing a declaration. This means that employee details must be verified before submission and employees without tax numbers must be registered with SARS before the company EMP501 can be submitted. Missing or invalid employee tax numbers result in incomplete submissions that will prevent IRP5 certificates from being captured, causing delays and non‑compliance for the company and all employees. Because so many employers struggle with technical challenges like these, SARS is rolling out technical clinics this year to make compliance easier. Or you could just let us handle it for you.

Consequences of non-compliance

Submitting incorrect or incomplete details, or submitting after the deadline, can result in:

• Additional admin, time and cost
• Employer penalties
• Delays in obtaining an employer’s tax compliance status
• Unexpected tax outcomes for employees

In addition, if the EMP501 submitted is audited by SARS and PAYE liability is amended, the employer is required to re-submit the EMP501 as per the audit result.

Expert assistance is at hand

As the deadline looms, employers can be assured of technical challenges, increased SARS scrutiny, and even more tax-related admin and cost. All very good reasons to rely on our tax expertise and experience to ensure you submit correctly and on time.

In October 2021, a global minimum tax framework for large multinational enterprises (MNEs) was established with the introduction of the GloBE (Global Anti-Base Erosion) model rules by the OECD (Organisation for Economic Cooperation and Development). These rules address profit shifting by multinational groups to low- or no-tax jurisdictions and ensure a minimum level of tax is paid on income in every jurisdiction in which MNEs operate. South Africa enacted the GloBE minimum tax legislation in 2024 and 2025, enabling SARS to impose a multinational top-up tax at a rate of 15% on the excess profits of affected MNE Groups. This tax effectively brings the overall taxation of foreign profits up to a minimum agreed level of 15%, where those profits have been subject to little or no tax offshore.

As such, the GMT is expected to generate significant additional tax revenues by curbing tax avoidance, ensuring multinational corporations contribute their fair share of taxes, and extending the country’s tax base. The GMT is expected to raise an estimated R2 billion in South African tax revenues. The broadened tax base will open opportunities to lower the personal income tax burden on individuals, or to consider more globally competitive corporate tax rates than the current 27%, which is well above the international average.

Which companies are directly affected?

The GloBE Rules apply to MNE Groups whose consolidated annual revenues equal or exceed EUR 750 million in at least two of the tax years immediately preceding the reporting fiscal year.

GMT deadlines

The local legislation governing GMT is deemed to have come into operation on 1 January 2024 and applies to MNEs’ subsequent “fiscal years”. Here are the deadline dates as published by SARS.

Source: SARS

How will the tax be calculated?

• The multinational top-up tax under the GMT legislation is imposed under:
• An Income Inclusion Rule (IIR) which taxes the domestic constituent entity (DCE) of an MNE Group on its allocable share of top-up tax arising in respect of the low-taxed income of any foreign group company in which it has a direct or indirect ownership interest.
• A Domestic Minimum Top-Up Tax (DMTT) imposes a “joint and several” tax liability on DCEs for top-up tax arising in respect of low-taxed income, calculated on an aggregate basis but only with respect to the entities located in South Africa.

Registration and reporting obligations

• Affected DCEs must register with SARS and file a GloBE Information Return (GIR) using the prescribed form and format by the prescribed due date.
• SARS must be notified where a “designated local entity” is appointed by DCEs required to file a GIR.
• DCEs must submit the notice no later than 6 months prior to the filing due date of the GIR. This due date is 15 months after the end of the reportable fiscal year for which the GIR must be filed (extended to 18 months for the 2024 fiscal year or the first fiscal year).
• DCEs must file the first GIR no later than 18 months after the end of the first reportable fiscal year. For the 2024 reportable fiscal year the GIR must be filed before 30 June 2026 (assuming a calendar year).
• The second and subsequent GIRs must be filed no later than 15 months after the end of the second and following reportable fiscal years.

SARS is ready: Are you?

SARS is actively preparing to administer the GloBE framework, with a dedicated project team, including IT and system engineers, and a specialised unit within its Large Business & International Unit. It aims to promote voluntary compliance and simplify adherence with the GMT legislation. Even so, a significant compliance burden and increased reporting scrutiny awaits affected companies. They will have to comply with new and technically demanding rules, even if no global minimum tax is ultimately payable. This will likely require specialist expertise, resulting in substantial additional compliance costs. We invite you to rely on our expertise to navigate this new corporate tax landscape, with its first reporting deadline just around the corner in June 2026.

As a small business owner, every rand you spend needs to return value, and your team building events are no exception. When structured properly, team building days can align your staff around shared goals, strengthen communication, and clarify behavioural expectations. They will improve output, reduce internal conflict, and build a culture that supports growth. But just how do you make that happen?

Start with clear business objectives

Before choosing a venue or activity, be clear on what you want to change or improve. Are teams struggling to communicate across departments? Is accountability an issue? Are managers and staff misaligned on priorities? Defining these objectives upfront ensures the day is purposeful rather than generic. Clear objectives also help you explain to your team why the event matters. When people understand the business reason behind the activity, engagement increases and resistance decreases.

Design activities that reflect real work challenges

The most effective team building events mirror the reality of your workplace. Activities should encourage collaboration, problem-solving, and decision-making in ways that resemble everyday business situations. When lessons feel relevant, they are much more likely to stick. Avoid activities that are purely physical or novelty-driven if they don’t translate back to the office. Fun has value, especially when it supports insight and learning.

Include time for reflection and discussion

One of the most overlooked elements of team building is reflection. Doing the activity isn’t enough. Teams need time to discuss what happened, what worked, what didn’t, and how it relates to their daily roles. These conversations can lead to real insights. They also help teams to agree on practical changes they can make once they return to work. It’s vital that all members of the team feel safe to speak up, ask questions and make mistakes without fear of retribution or punishment. By making sure all voices are heard on something small like losing at tug-of-war, you can reinforce that attitude in the day-to-day office space and equip your teams to perform at their best.

Reinforce leadership behaviour

Team building will only succeed if leaders model the behaviours being promoted. If collaboration, accountability, and open communication are encouraged on the day but ignored afterwards, the impact quickly fades. As a business owner or manager, you should participate fully, demonstrate vulnerability where appropriate, and reinforce lessons in the weeks that follow.

Convert insights into habits

Effective team building does not end when everyone goes home. Follow-up meetings, check-ins, and ongoing conversations are essential to embed new behaviours. Refer back to shared experiences and agreed principles when challenges arise.

Budget carefully and measure the return

As with any business initiative, cost matters. Team building exercises should be planned within a clear budget, and with a realistic view of expected outcomes. Your accountant can help you structure this spend appropriately, ensure tax considerations are handled correctly, and assess whether the investment delivers measurable returns. Reduced absenteeism, improved productivity, and stronger retention are all indicators worth tracking. If you’re unsure how to measure impact, speak to your accountant: we can help you to access the data you need.

The bottom line

Team building that works is intentional, relevant, and accountable. It focuses on behaviour, not just morale, and it connects people more closely to the goals of your business. When done properly, it strengthens both culture and performance. For small business owners, the key is to treat team building with the same seriousness as any other investment. Plan carefully, follow up consistently, and involve your accountant where appropriate to ensure that what you spend delivers lasting value, not just a good day out.

Some of the best news in the 2026 Budget is the proposed increases in the compulsory VAT registration threshold from R1 million to R2.3 million and in the voluntary registration threshold from R50,000 to R120,000, with effect from 1 April 2026. This will immediately ease the disproportionate administrative burden and compliance cost on small businesses which would have had to register soon. What’s more, VAT registered businesses may apply to deregister for VAT if they no longer exceed the increased compulsory registration threshold on 1 April 2026. Deregistering for VAT can improve cash flow. But it’s a decision that should not be taken without consulting us, as it can trigger substantial adverse tax consequences that might well convince you not to deregister.

Reduced admin and costs

The compulsory registration threshold had not been adjusted for inflation since 2009. The new R2.3 million threshold, which slightly outstrips inflation, will ease the previously disproportionate compliance burden relative to turnover on smaller businesses. It may also spur unrestrained growth among many small businesses which felt forced to contain themselves to avoid the VAT net and its never-ending impact on admin and cashflow.

Option to deregister

Given the above, many small businesses will be keen to deregister for VAT. The good news is that it is possible for VAT registration to be cancelled – provided certain requirements are met. The first is that all outstanding liabilities and obligations in terms of the VAT Act have been resolved or settled.  The Commissioner will issue a notice of cancellation of registration which will also inform the vendor of the date on which the cancellation takes effect and the final VAT period. SARS says output VAT on certain assets on hand at the time must also be declared together with any other output tax and input tax in the VAT return for that final tax period. In other words, you must declare the amount of output VAT on the value of the business’ assets at the date of deregistration and pay this over to SARS. There is also a general unpaid-creditor claw-back provision that requires a vendor to reverse previously claimed input VAT by accounting for output VAT on amounts due to creditors but not paid within 12 months of the date they became payable. This rule applies throughout the VAT registration period but is also triggered immediately before a vendor ceases to be registered. Commonly referred to as “exit VAT”, this can cause immediate and possibly substantial financial implications that could strain your cashflow. 

Before deregistering

If you are interested in deregistering for VAT, we urge you to speak to us to ensure you fully understand the financial implications and can carefully plan the timing to avoid tax surprises and cash flow problems.

Business owners work hard to grow revenue and increase profit. What often receives less attention is how that growth alters your tax obligations. Higher turnover can trigger VAT registration. Rising profit increases provisional tax exposure. Hiring staff adds payroll compliance risk. Expansion across borders introduces new tax jurisdictions. Even improved margins can create cash flow pressure when tax payments are due before debtors settle their accounts.

Crossing the VAT threshold

In South Africa, once your taxable supplies exceed the compulsory registration threshold (recently increased from R1 million per year to R2.3 million per year), you must register for VAT. Many businesses grow quickly and miss the moment they cross it. This simple mistake can trigger penalties, interest, and backdated VAT. Cash flow can become a second issue. You collect VAT on sales, but input VAT claims lag if suppliers don’t issue proper invoices. If you price incorrectly, you may end up funding VAT from your own margin. You might even have to pay output VAT on sales before you have received payment from your debtors. Growth often means higher transaction volume as well. That increases the risk of errors in VAT coding, zero-rated supplies, and mixed-use expenses. It’s easy to see how a small bookkeeping mistake can easily become a material tax exposure.

Of course, there can also be benefits to registering for VAT, not least the potential right to claim input VAT on certain assets that have been purchased before you registered for VAT, and that are now used to make taxable supplies. VAT must however have been charged at the time of purchase. This can provide a nice inflow of cash, if handled correctly. Bottom line: speak to your accountant!

Provisional tax shocks

When profit rises, so does income tax. Owners often draw more cash as profits rise. They forget that tax on those profits has not yet been paid, and by the time the assessment arrives, the money is gone. Provisional tax can be particularly problematic. Estimates based on last year’s lower profits lead to underpayment penalties when actual results are filed. Rapid growth can produce a large balancing payment in the second provisional period, or at year end.

Payroll expansion and compliance risk

Hiring staff is a sign of progress. It also triggers pay-as-you-earn (PAYE), unemployment insurance fund (UIF), and skills development levy (SDL) obligations. Errors in payroll setup multiply as your headcount increases. If payroll software isn’t configured correctly, you can under-deduct PAYE. Add penalties and interest, and growth in staff numbers can become a financial setback. Share incentive schemes and other fringe benefits introduce potential tax complications. Without guidance, these benefits can be structured in ways that create unexpected tax costs for both employer and employee.

Operating across borders

Sometimes growth means selling beyond South Africa’s borders. Cross-border trade brings customs duties, foreign VAT, transfer pricing, and double taxation agreements into play. A small e-commerce business that starts shipping internationally may create a permanent establishment in another jurisdiction without even realising it. That can expose them to foreign corporate tax. Currency gains and losses add volatility. If not monitored carefully, taxable income can rise even when cash flow does not.

Structural strains

The structure that worked at start-up may not suit a larger business. A sole proprietorship with modest turnover may be efficient. The same structure with higher profit can push you into a steeper marginal tax bracket. When investors buy into new structures, share issues and valuations may raise capital gains tax and income tax questions if roll-over relief is not available. Growth may also expose structural weaknesses. Dividends tax and loans between shareholders and companies can create further tax considerations.

Capital expenditure and allowances

Expanding operations usually requires additional equipment, vehicles, or property. Tax deductions for capital assets now need to be considered. Meanwhile, disposal of older equipment may trigger recoupments or capital gains taxes. A growing business that upgrades assets frequently should definitely model the tax impact of these upgrades before committing.

Cash flow versus profit

Rapid growth often ties cash up in stock and debtors. Profit on paper doesn’t mean cash in the bank. Tax is calculated on taxable income, not on what clients have paid. What this all means is that a business can show strong profit, and owe tax on that profit, but still struggle to pay tax because of cash flow issues. Cash flow forecasting must include tax forecasting.

Audit risk

As turnover grows, so does visibility. Larger payrolls, higher VAT submissions, and bigger provisional payments attract scrutiny. Inaccurate returns that went unnoticed at a small scale can become costly when the numbers are larger. Internal controls that were informal at start-up stage now need formal processes. Documentation matters. Contracts, invoices, and board resolutions must support your tax position. Without them, assessments become difficult to dispute.

Planning for growth, not reacting to it

Growth doesn’t create tax problems on its own. Lack of planning does. Review your tax registrations before revenue spikes, update provisional tax estimates during the year, and align owner withdrawals with after-tax profit, not turnover. It’s also important that you reassess your entity structure as profit bands change, and model the tax impact of hiring, investing, or expanding offshore before you act. Growth is a good problem to have. But it is still a problem if ignored. Engage your accountant early in the growth phase, not after the assessment arrives.