R1 million gift for South African taxpayers

South Africa’s National Treasury has doubled the Single Discretionary Allowance (SDA) to R2 million per year, giving taxpayers greater flexibility to move money offshore.

This was explained by Tax Consulting SA’s team lead of tax legal, Micaela Paschini, and tax attorney, Megan Langton.

“In an increasingly digital economy where money moves as easily as a swipe or subscription renewal, South Africans have quietly been stretching the limits of what discretionary spending looks like – until now,” they said.

Reflecting modern spending patterns, the National Treasury will increase the SDA for private individuals.

The limit will rise from R1 million to R2 million per calendar year, and is expected to apply to the 2026 calendar year, following formal implementation.

The increase, applying across all permissible purposes, including travel, gifts, remittances, offshore investments and donations, introduces a notable adjustment to South Africa’s exchange control framework.

Announced in the 2026 Budget, the higher threshold comes amid increased cross-border outflows by individuals, which have steadily eroded the practical value of the previous R1 million limit.

“Doubling the allowance acknowledges this inflationary reality while maintaining the broader regulatory structure governing outward flows,” Paschini and Langton said.

“This is the first meaningful recalibration of the discretionary framework since the post-2015 consolidation of the Currency and Exchanges Manual. While the quantum has shifted, the compliance architecture has not.”

Paschini and Langton said amendments to the Currency and Exchanges Manual in 2015 clarified the distinction between current account transactions, capital transfers and transactions requiring prior approval.

The R1 million threshold became the practical dividing line below which resident individuals could externalise funds without first obtaining SARS tax clearance, provided transfers were correctly processed and reported by Authorised Dealers.

“Since then, bank verification duties have intensified, and tax compliance considerations have increasingly intersected with outward flows,” they said.

“The increase to R2 million must therefore be viewed as an adjustment within an established framework rather than a fundamental liberalisation.”

What the increase means for taxpayers

For resident individuals, the increased threshold expands the annual headroom available before engaging the more formal channels, Paschini and Langton explained.

In particular, individuals have more leeway before needing to utilise the Foreign Investment Allowance and the associated SARS tax clearance process through an Approval for International Transfer (AIT).

“Individuals will now be permitted to externalise up to R2 million annually without applying for a SARS AIT PIN, effectively doubling the amount that may be transferred before entering the tax clearance regime,” they said.

“For many taxpayers, this means fewer applications, fewer delays and greater flexibility in structuring offshore transfers. For higher-income individuals, the change may have an even more noticeable effect.”

At the upper end of the personal income tax brackets, it is now theoretically possible for a substantial portion of a year’s net salary to be externalised using the SDA alone, depending on lifestyle expenditure and tax profile.

In some cases, Paschini and Langton said higher earners may even be able to externalise the entirety of their year’s net salary using this channel.

However, it is important to note that the R1 million increase does not dilute the underlying regulatory principles.

“Authorised Dealers remain responsible for verifying the source of funds, classifying transactions correctly for Balance of Payments purposes, and ensuring that transfers are legitimate and permissible,” they cautioned.

“The annual cap remains absolute. Once the R2 million threshold is reached in a calendar year, further outward transfers will typically require the appropriate SARS tax clearance pathway.”

Paschini and Langton added that the increase in the SDA should also be understood alongside the broader exchange control framework.

“The R10 million foreign investment allowance is often misconstrued as a lifetime cap, when in fact it applies per calendar year,” they said.

Additionally, while amounts exceeding this threshold require approval from the South African Reserve Bank, this does not mean they are not prohibited.

“Over time, there is therefore no fixed limit on the quantum that may be externalised, provided the applicable requirements are met,” they said.

Practical implications

Paschini and Langton noted that, for globally mobile individuals and families, the higher threshold provides welcome flexibility.

“Offshore portfolio allocations can now be phased more efficiently. International family support arrangements can be structured with greater headroom,” they said.

“Cross-border lifestyle expenditure, including travel, education and recurring offshore commitments, can be accommodated with reduced administrative friction and fewer interruptions to funding flows.”

At the same time, cumulative transfers across multiple institutions remain aggregated for purposes of the annual limit. Transfers inconsistent with declared income or historical patterns may invite enquiry.

Misclassification of reporting codes can create regulatory friction long after the funds have left the country, and an increased allowance does not equate to relaxed oversight.

“The 2026 Budget signals a pragmatic adjustment rather than a policy departure. South Africa’s exchange control system remains rules-based and compliance-driven,” they said.

“The increase to R2 million acknowledges economic realities, but it does so within a framework that continues to prioritise transparency, reporting accuracy and tax alignment.”

Paschini and Langton added that for individuals with cross-border exposure, the expanded allowance presents an opportunity.

“It also reinforces the need to align exchange control strategy with tax compliance and banking execution from the outset. Although regulatory limits may be increased, the onus to substantiate remains constant,” they said.