SARS Carbon Tax Phase 2: Key Deadlines Every SA Property Manager Must Know in 2026

What is the Carbon Tax Phase 2?

South Africa's Carbon Tax Act (Act No. 15 of 2019) was introduced in two phases. Phase 1 ran from June 2019 through December 2025, functioning as a relatively gentle introduction with extensive tax-free allowances that reduced the effective tax rate to near zero for many emitters. Phase 2, which began on 1 January 2026, marks a fundamental shift: the allowances are being reduced, the effective tax rate is climbing, and SARS reporting requirements are tightening.

For property managers and building owners in South Africa, this is no longer a distant regulatory concern. If your buildings consume electricity from the Eskom grid, burn diesel for backup generation, or use natural gas for heating, you are directly or indirectly exposed to carbon tax liability. Phase 2 is where the financial impact becomes real.

Key 2026 Deadlines at a Glance

Date	Milestone	Who's affected
1 Jan 2026	Phase 2 effective date — reduced tax-free allowances take effect	All carbon tax-liable entities
28 Feb 2026	SARS environmental levy returns due for the period ending 31 Dec 2025 (Phase 1 final filing)	Direct emitters above threshold
31 Mar 2026	DFFE greenhouse gas emissions reporting deadline (for 2025 calendar year)	Companies above reporting threshold
Q2 2026	First quarterly provisional carbon tax payments under Phase 2 regime	Directly liable entities
31 Jul 2026	SARS environmental levy return due for first Phase 2 period (Jan–Jun 2026)	All carbon tax-liable entities
30 Sep 2026	GRESB submission deadline — carbon tax exposure now a scoring factor	Listed property funds, REITs
31 Dec 2026	End of first full year under Phase 2; basis for 2027 carbon tax returns	All carbon tax-liable entities

What Changed Between Phase 1 and Phase 2?

The most significant change is the reduction in tax-free allowances. During Phase 1, companies could claim up to 95% in combined allowances, reducing the effective rate to as little as R6–R12 per tonne of CO₂e. Under Phase 2, total allowances are capped lower, and the basic tax-free threshold of 60% is being reduced over time.

Here's what this means in practice:

• Base rate: R236 per tonne of CO₂e for 2026 (up from R190 in the final year of Phase 1, adjusted for inflation).
• Reduced allowances: The basic tax-free allowance drops from up to 60% initially, with further reductions expected annually. Trade exposure allowances and performance allowances remain, but the total cap is lower.
• Effective rate increase: Where the Phase 1 effective rate was roughly R6–R48/tCO₂e depending on allowances, Phase 2 effective rates will range from approximately R70–R140/tCO₂e for most property-related emissions.
• Scope expansion: DFFE is expanding the scope of mandatory GHG reporting, which feeds into SARS carbon tax assessments. More buildings and operations will fall under reporting thresholds.

"Phase 1 was a warning. Phase 2 is the invoice. Property managers who haven't started measuring their carbon footprint are already behind."

How Does This Affect Property Managers?

Most commercial property in South Africa doesn't emit CO₂ directly from on-site combustion at a scale that triggers carbon tax liability on its own. However, the carbon tax affects property managers in three important ways:

1. Indirect cost pass-through from Eskom

Eskom is the single largest carbon tax payer in South Africa. As the carbon tax rate increases under Phase 2, Eskom's costs rise, and those costs are passed through to electricity tariffs. NERSA has approved pass-through mechanisms that allow carbon tax costs to be reflected in tariff increases. For grid-dependent buildings, this means your electricity bill goes up — and the carbon tax component of that increase is growing.

2. Direct liability for on-site combustion

If your buildings use diesel generators, natural gas boilers, or other fossil fuel combustion on site, and the total emissions from those sources exceed the reporting threshold, you may have direct carbon tax liability. This is particularly relevant for:

• Shopping centres and office parks with significant backup generation
• Industrial properties with gas-fired heating or process equipment
• Mixed-use developments with centralised heating plants

3. ESG and investor reporting

GRESB, GRI, and TCFD frameworks all require disclosure of carbon tax exposure. Listed property funds and REITs are under increasing pressure from investors to quantify their carbon tax risk. Under Phase 2, this is no longer a theoretical line item — it's a material cost that affects NAV and distribution forecasts.

Five Steps to Prepare Your Portfolio

Step 1: Measure your carbon footprint

You can't manage what you don't measure. Collect 12 months of electricity bills, diesel purchase records, and gas meter readings for every building in your portfolio. Calculate your Scope 1 (direct) and Scope 2 (electricity) emissions using the latest DFFE emission factors.

Step 2: Identify your reporting obligations

Check whether your emissions exceed the DFFE mandatory reporting threshold. If any of your buildings or operations cross the threshold, you are required to submit annual GHG reports to the DFFE — and this data feeds into SARS carbon tax assessments.

Step 3: Quantify your financial exposure

Calculate the carbon tax cost at the 2026 rate (R236/tCO₂e) and apply the relevant allowances. Factor in both direct liability and the indirect cost increase embedded in Eskom tariffs. Build this into your operating expense forecasts and tenant recovery budgets.

Step 4: Develop a reduction roadmap

The most effective way to reduce carbon tax exposure is to reduce emissions. Priority interventions for commercial property include:

• Solar PV installation — reduces grid dependence and Scope 2 emissions
• LED lighting retrofits — typically 30–50% lighting energy reduction
• HVAC optimisation — building management system tuning, VSD retrofits
• Energy performance certificates (EPCs) — mandatory for commercial buildings and a baseline for improvement
• Green Star certification — demonstrates compliance and commitment to tenants and investors

Step 5: Automate your ESG reporting

Manual carbon tracking in spreadsheets doesn't scale. If you manage more than a handful of buildings, you need a platform that tracks energy consumption, calculates emissions, monitors carbon tax liability, and generates the reports required by SARS, DFFE, GRESB, and your investors — automatically and in the South African context.

The Bottom Line

SARS Carbon Tax Phase 2 is not a future event — it's the current operating environment for South African property. The reduced allowances mean the effective cost of carbon is rising significantly, and the reporting requirements are tightening. Property managers who haven't started measuring, reporting, and reducing their carbon footprint are already at a competitive disadvantage.

The good news is that the interventions are well understood (solar, LED, HVAC optimisation) and the payback periods are getting shorter as carbon tax rates climb. The question isn't whether to act — it's whether you'll act before the next deadline or after the next penalty.