South Africa: Proposal to reduce threshold for ring-fencing losses from certain trades
Proposed change would lower threshold to R673,000, effective March 1, 2026
The 2025 Draft Taxation Laws Amendment Bill proposed lowering the income threshold at which Section 20A of the Income Tax Act No. 58 of 1962 applies. Currently, taxable income above R1.817 million is subject to ring-fencing, but the proposed change would lower this threshold to R673,000 effective March 1, 2026.
Ring-fencing restricts the use of assessed losses from high-risk or “suspect” trades, allowing them to be offset only against income from similar trades. Suspect trades are considered more prone to generating tax losses, and include activities such as sporting activities, dealing in collectibles, gambling, and renting out residential accommodation, among others.
Ring-fencing applies if a taxpayer's income exceeds the threshold and the trade generated losses in at least three of the preceding five years or is listed as a “suspect trade.” Exceptions exist if there is a reasonable prospect of generating taxable income within a reasonable period, unless losses have occurred in six out of the last 10 years, excluding farming.
Read a September 2025 report prepared by the KPMG member firm in South Africa.