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Medical Aid Tax Credits – Week 4

Medical Scheme Fees Tax Credits

Medical aid tax credits Frequently asked questions is the topic for week 4

Who is a Dependant?

A dependant is:

  • A spouse (i.e. husband or wife)
  • A child and the child of a spouse (e.g. son, daughter, step son, step daughter, adopted child)
  • Who was alive during any portion of the year of assessment, and who on the last day of the year of assessment:

ØWas unmarried and was not or would not, had he or she lived, have been:

ØOlder than 18 years

ØOlder than 21 years and was entirely or partly dependent for maintenance on the person and has not become liable to pay normal tax for the year

ØOlder than 26 years and was entirely or partly dependent for maintenance on the person and has not  become liable to pay normal tax for the year and was a full-time student at an educational institution of a public character; or

  • In the case of any other child, was incapacitated by a disability from maintaining himself or herself and was entirely or partly dependent for maintenance on the person and hasn’t become liable to pay normal tax for that year.
  • Any other member of a person’s family for whom he or she is liable for family care and support (e.g. mother, father, mother-in-law, father-in-law, brother, sister, grandparents, grandchildren.)
  • Any other person who is recognised as a dependant of that person in terms of the rules of a medical scheme or fund.

CALCULATION OF ADDITIONAL MEDICAL EXPENSES TAX CREDIT

  • There are 3 ways to calculate additional medical expenses tax credit

med aid tax credits

Lets have a look at an Example

Mr Jim Hardens is 67 years old, he earns a basic salary of R15,000 per month and the company contributes the full medical aid contribution of R1,000 on his behalf. He is the only member on his medical aid. Below, please see how the calculation differs for tax year 2015/16 and 2016/17. Seeing that Jim is over 65 years, he also needs to be taxed on the medical tax credit system, effective 1 March 2014.

 

1.TAX YEAR 1.2016 / 2017
1.SALARY 1.R 15 000
1.ADD MEDICAL AID FRINGE BENEFIT 1.R 15 000 + R 1 000 = R 16 000
1.ANNUALISES TAXABLE INCOME 1.R 16 000 * 12 = R 192 000
1.TAX AS PER SARS TABLES 1.R 192 000 – R 188 001 = R 3 999*26% + R33 840 = R 34 879.74
1.LESS PRIMARY REBATE 1.R 34 879.74 – R 13 500 = R 21 379.74
1.LESS SECONDARY REBATE (FOR EMPLOYEES OVER 65 YRS) 1.R 21 379.74 – R 7 407 = R 13 972.74
1.DEANNUALISE 1.R13 972.74 / 12 = R 1 164.39
1.LESS MEDICAL AID TAX CREDITS 1.R 1 164.39 – R 286
1.PAYE FOR THE MONTH 1.R  878.39
1.TAX YEAR 1.2015 / 2016
1.SALARY 1.R 15 000
1.ADD MEDICAL AID FRINGE BENEFIT 1.R 15 000 + R 1 000 = R 16 000
1.ANNUALISES TAXABLE INCOME 1.R 16 000 * 12 = R 192 000
1.TAX AS PER SARS TABLES 1.R 192 000 – R 181 900 = R 10 100*26% + R32 742 = R 35 368
1.LESS PRIMARY REBATE 1.R 35 368 – R 13 257 = R 22 111
1.LESS SECONDARY REBATE (FOR EMPLOYEES OVER 65 YRS) 1.R 22 111 – R 7 407 = R 14 704
1.DEANNUALISE 1.R14 704 / 12 = R 1 225 .33
1.LESS MEDICAL AID TAX CREDITS 1.R 1 225.33 – R 270
1.PAYE FOR THE MONTH 1.R  955 . 33
1.TOTAL SAVING 1.R 76.94

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Disclaimer: The information published in this article or newsletter is of general nature and should not be used without obtaining specific advice as to its application in your business or under your specific circumstances. Pay Solutions will accept no liability if the information is used without first obtaining specific advice from one of our consultants.