The Draft Taxation Laws Amendment Bill 2026 changes three things for individuals. Section 6A medical credits extend to members of a "restricted medical scheme". The R150 000 living annuity commutation limit becomes cumulative. Gifts to a non-resident spouse lose the donations tax exemption from 25 February 2026.
National Treasury and SARS published the draft bill for comment on 30 July 2026, and the comment window closed on 28 August 2026. Each change is drafted to apply from a date that has already passed, so donations you made this year, the medical credits you claim for 2026/27 and any small living annuity you plan to cash out already sit inside the new rules.
I'm Chris Herbst, Managing Director at CH Consulting. I hold the CBAP(SA) designation as a Practising Member of the Southern African Institute of Business Accountants and the GTP(SA) designation as a Practising Member of the South African Institute of Tax Professionals. Our practice prepares ITR12 returns for individual taxpayers every filing season, including medical credit claims, retirement lump sum questions and donations planning for couples where one spouse lives abroad.
What is in the Draft Taxation Laws Amendment Bill 2026 for individuals?
The Draft Taxation Laws Amendment Bill 2026 contains three changes that reach individual taxpayers: medical credits for members of restricted medical schemes, a cumulative de minimis limit for people with several living annuities, and a residence condition on the donations tax exemption between spouses.
The draft carries out tax proposals from the 2026 Budget of 25 February 2026, covering Chapter 4 and Annexure C of the Budget Review. Treasury listed five key proposals: the de minimis limit for multiple living annuities, limiting the donations tax exemption for a non-resident spouse, transfer pricing for special economic zones, leasehold improvements and carbon budget refunds. The last three are business measures. The medical credit change does not appear on that list, but it is in the bill as a new tax definition, which is why company-focused summaries tend to pass over it.
Is the Draft Taxation Laws Amendment Bill 2026 law yet?
No, the Draft Taxation Laws Amendment Bill 2026 is still a draft: it was published for comment on 30 July 2026 and has to be tabled in Parliament and passed before it becomes law.
When did the comment period close?
Written comments were due by close of business on 28 August 2026, according to the official media statement. EBnet printed 12 September 2026; the official date is 28 August.
What happens next?
Treasury and SARS weigh the submissions, revise the wording and then table the bill in Parliament. The bill is normally tabled after the Medium Term Budget Policy Statement. Clauses can change between the draft and the tabled version, so we check the final text before advising on any return that relies on it.
Is this the same as the Taxation Laws Amendment Act, 2026?
No. The Taxation Laws Amendment Act, 2026 (Act 5 of 2026) was published in Government Gazette 54448 on 1 April 2026 and is already law. The draft discussed here is a separate, later bill.
Who qualifies for the section 6A medical credit under the draft bill?
Under the draft bill, the section 6A medical scheme fees credit would also be available to members of a "restricted medical scheme", meaning a statutory scheme outside the Council for Medical Schemes that offers benefits, governance and solvency at least equivalent to the Medical Schemes Act (1998).
How does section 6A work now?
Section 6A(2)(a)(i) grants the credit only for fees paid to "a medical scheme registered under the Medical Schemes Act". SARS's medical credits page adds similar funds outside South Africa, and covers you and your dependants as defined in section 6B(1). Our guide to medical tax deductions sets out the basics.
What is a restricted medical scheme?
Annexure C of the 2026 Budget Review explains that some statutory medical schemes fall outside the Council for Medical Schemes because of regulatory constraints, which locks their members out of the credit. The draft responds with a tax definition of "restricted medical scheme". Treasury and SARS have not published a list of the schemes that meet the definition, as Moonstone reported. Ask your scheme for written confirmation that it expects to qualify, and file that letter with your tax records.
Does the change cover the additional medical expenses credit?
Yes. Tax Consulting SA reports that the definition extends both the fees credit and the additional medical expenses credit in section 6B. For 2026/27 SARS states that the additional credit is 33.3% of qualifying out-of-pocket costs for people aged 65 or older or with a disability. For everyone else it is 25%, limited to the amount above 7.5% of taxable income.
When does it apply, and which return does it first affect?
The draft wording following the section 6A amendment in the Treasury draft states that it comes into operation on 1 March 2026 and applies to years of assessment commencing on or after that date. For an individual, that is the 2027 year of assessment, running from 1 March 2026 to 28 February 2027, so the first return it touches is your ITR12 for 2027. Years before that are outside the change.
What are the medical credit amounts for 2026/27?
SARS's Budget 2026 FAQ sets the fees credit at R376 a month for each of the first two people covered (up from R364), and R254 a month for each additional dependant (up from R246). The 2026 Rates Bill that carries these figures was still open for comment in June 2026, so check that it has been enacted before you file. Guide IT07 (Issue 18) confirms the credit is not refundable: it is limited to tax payable before PAYE and provisional tax are offset, and any excess cannot be carried forward.
Can I cash out more than one small living annuity under the draft bill?
Under the draft bill you can commute your living annuities for cash only if their combined value with the same insurer or fund is below the prescribed amount, which is R150 000 from 1 March 2026.
What is the living annuity de minimis?
Paragraph (c) of the "living annuity" definition in section 1(1) allows the whole remaining value to be paid as a lump sum once it falls below an amount the Minister prescribes. That amount rose from R125 000 to R150 000 from 1 March 2026, prescribed in Government Gazette 54399 on 23 March 2026. The draft does not change the R150 000.
What does the new proviso change?
The draft adds a proviso that the prescribed amount is "applied cumulatively where an individual holds multiple" living annuities, meaning annuities held with the same insurer or fund. The 2026 Budget Review recorded that interpretations differed between a per-policy and a per-insurer reading. Moonstone reports that SARS already adds together annuities held with the same insurer or fund, so the proviso writes current practice into the Act. Two living annuities of R100 000 each at one insurer total R200 000, which is above R150 000, so neither qualifies for commutation under the de minimis rule.
What if your annuities are with different providers?
The proviso refers to annuities with the same insurer or fund, so annuities with different providers fall outside the aggregation it describes. SARS has not published a ruling or Interpretation Note on this point. Get your administrator's confirmation in writing before you rely on separate treatment.
Can a trust that inherited a living annuity cash it out?
Since 1 March 2021, a living annuity can be commuted when a trust nominated to receive it after the original annuitant's death is being wound up. The draft does not alter this.
Did any other retirement limits change?
Two other thresholds moved on 1 March 2026 through the Budget rather than the bill: the retirement fund de minimis for annuitisation rose from R247 500 to R360 000, and the retirement contribution deduction cap rose from R350 000 to R430 000, as the Sanlam legal report summarises. Our note on retirement fund deductions explains how the cap works on your return.
Is a donation to a non-resident spouse still exempt under the Draft Taxation Laws Amendment Bill 2026?
No, under the Draft Taxation Laws Amendment Bill 2026 a donation to your spouse is exempt from donations tax only if your spouse is a South African tax resident, and this applies to donations made on or after 25 February 2026.
What does clause 17 change?
Practitioners cite clause 17 of the draft as the amendment to section 56(1)(a) and (b). Annexure C frames it as limiting the spousal exemption to donations to a resident spouse. Gifts between two resident spouses remain exempt.
Why does it reach back to 25 February 2026?
The draft deems the subsection to have come into operation on 25 February 2026, the day of the Budget announcement, and applies it to donations made on or after that date. Treasury treats donations to a non-resident spouse as an avoidance arrangement. A practitioner quoted by Moonstone notes that a non-resident receiving spouse has had no capital gains tax relief for some time and asks what mischief the change targets. Plan on the draft as written.
What about donations you have already made?
A donation to a non-resident spouse since 25 February 2026 attracts donations tax once the Act is passed, on the value at the date of each donation. SARS has not published guidance on when these donations must be reported or whether interest or penalties apply for the period before the Act is passed. Treat them as taxable now, obtain a dated valuation of each asset, and hold off on new donations to a non-resident spouse until the law is final.
What decides whether your spouse is resident?
Your spouse's tax residence on the date of each donation decides the outcome. If your spouse has ceased to be resident, for example after emigrating, the exemption no longer covers gifts to them. Our guide to tax residency in South Africa sets out the tests.
Does the Draft Taxation Laws Amendment Bill 2026 change anything for employees or trusts?
Treasury's list of key proposals in the Draft Taxation Laws Amendment Bill 2026 contains no employment, fringe benefit or trust changes for individuals.
What about sections 6quat and 62?
The draft also amends section 6quat and section 62 of the Income Tax Act, and Treasury did not list either among its key proposals. If either section features in your affairs, have the final wording read against your facts before you file.
What is in the draft TALAB for individuals?
The draft Tax Administration Laws Amendment Bill, published alongside, proposes that banks may screen tax refunds before or after paying them out, and offers interest relief on defaults disclosed in a voluntary disclosure application. If a refund is already held up, our article on a delayed SARS refund covers the current process, and our voluntary disclosure guide explains how an application works today.
Which return does each change first affect?
The restricted medical scheme credit first affects your return for the 2027 year of assessment, the cumulative living annuity test affects your next commutation request, and the spousal donations change affects any donation made on or after 25 February 2026.
- Restricted scheme credits (s6A, s6B): Applies from: 1 March 2026; First affects: 2027 ITR12; Status: No SARS guidance yet
- Cumulative living annuity test: Applies from: Codifies current practice; First affects: Next commutation request; Status: Blocks split claims
- Spousal donations (s56): Applies from: 25 February 2026; First affects: Donations from that date; Status: Backdated exposure
- Fees credit R376 and R254: Applies from: 2026/27 tax year; First affects: 2027 ITR12; Status: Published by SARS
- Retirement de minimis R360 000: Applies from: 1 March 2026; First affects: Retirement at fund; Status: Budget measure
The last two rows are Budget measures rather than bill clauses. We include them because they move on the same date and land on the same return.
What should you do now about the draft bill?
You act now by documenting your position under each change, so that the return or request you submit after the Act is passed is supported from the start.
- Ask your scheme in writing. If your scheme sits outside the Council for Medical Schemes, request a letter confirming it expects to meet the restricted medical scheme definition.
- Keep the contribution certificate. File your scheme's annual contribution certificate and proof of payment with your 2027 records. Our list of documents needed to file a tax return shows where it fits.
- Leave payroll alone. Do not ask your employer to apply the credit through PAYE before the Act is passed.
- Check two Acts before filing. Before you submit the ITR12 for 2027, confirm the Taxation Laws Amendment Act and the Rates Act have been enacted. Our filing season guide covers how the season runs.
- Claim and apportion correctly. Claim the credit in the medical section of your return. Where more than one person pays the contributions, apportion the credit under IT07 section 2.5.
- Total your living annuities. List every living annuity you hold with each insurer or fund, add the values and compare the total with R150 000 before requesting a commutation.
- Record donations to a non-resident spouse. Note the date, asset and dated valuation of every donation since 25 February 2026, and pause new ones until the law is final.
- Prepare for verification. Keep everything in one file in case SARS asks for supporting documents.
What are the most common mistakes with the 2026 draft bill changes?
The most common mistake is acting as if the draft bill is already law, either by claiming its benefits early or by ignoring its backdated costs.
Asking payroll to apply the restricted scheme credit
Employers apply the fees credit through monthly PAYE when contributions come off your salary, as MST Group explains. Payroll systems will not recognise a restricted scheme until the Act is passed and SARS updates its specifications, so members claim on assessment.
Counting on a refund before the Act passes
The credit is not refundable and depends on the final Act. Budget for the 2026/27 year without it until the law is passed.
Treating each living annuity as a separate policy
A request to treat two small policies at one insurer separately will not get approval, because the cumulative test adds them together.
Assuming the spousal exemption still covers a non-resident spouse
Couples who moved assets offshore to a non-resident spouse after 25 February 2026 face donations tax once the Act is passed, with values reconstructed as at each donation date.
Working from the wrong dates or figures
The comment deadline was 28 August 2026, not 12 September. acts.co.za still shows R364 and R246 for section 6A; use SARS's published R376 and R254 and confirm the Rates Act before you file.
What does SARS already hold, and how does a mismatch show up?
SARS sees payroll-applied medical credits through PAYE and your IRP5, and learns of a spouse's change of residence through the declarations taxpayers make themselves.
If payroll does not recognise your restricted scheme, your IRP5 shows no medical credit and the claim rests on your return alone. That gap between the IRP5 and the return is what prompts SARS to ask for proof, so the scheme's certificate and your payment records carry the claim. Our article on how SARS gets access to financial information explains the wider picture.
Your insurer or fund holds the value of every living annuity you have with it and applies the cumulative test when you ask to commute. On the donations side, a spouse who has declared non-residence while you have not accounted for gifts to them since 25 February 2026 creates two records that do not agree.
Do You Need Help With the Draft Taxation Laws Amendment Bill 2026?
If you belong to a statutory medical scheme, hold several small living annuities or have made gifts to a spouse who lives abroad, the draft bill affects decisions you are making this year. Book a call and we will work through your own circumstances, or email info@chconsulting.co.za with your questions.
