As happens every year when finance minister Pravin Gordhan reads his budget speech, medical aid tax credits have gone up. Individuals receive 257 credits while 172 credits are awarded for additional individuals, says Sonika van Wyk: legislation business consultant at CRS Technologies. Read on to find out the other changes to the medical aid tax credits system that you need to be aware of.
Under the previous legislation, those individuals over the age of 65 didn’t get a tax credit says Van Wyk. Their whole contribution was deducted. “This has now changed,” she says, “whereby individuals over 65 will now also be receiving medical tax credits. This system became effective from 1 March this year.”
When will medical disability expenses be allowed?
Those who are 65 years and older will now be entitled to claim disability expenses. Alternatively, if a person, his/her spouse or child has a disability, these people will be allowed to claim a disability expense.
“A qualifying individual over the age of 65 will be able to claim 33% of the aggregate of the full medical scheme contributions in excess of three times the medical aid tax credit plus 33.3% of all other qualifying out-of pocket medical expenses paid by that person, excluding medical scheme contributions,” says Van Wyk.
Those people younger than 65 will be able to claim 25% of the aggregate of the full medical scheme contributions, i.e. four times the credit plus all other qualifying out-of-pocket medical expenses.
Mr X is 65 and for the year of assessment that begins on 1 March 2014, he made contributions to the medical scheme of R2 000 per month on behalf of himself and his wife. By 28 Feb 2015, he’d incurred R20 000 in qualifying medical expenses. How would we work out the amount of money he would get back?
- His monthly contributions are R2 000 per month so the annualised amount will be R24 000.
- His monthly medical aid tax credits calculation will be 257 + 257 = 514. This will result in an annualised amount of 6168.
- His expense calculation = 24 000 – 3 x 6168 = 5 496 x 33.3% = 1830.
- All qualifying medical expenses which don’t form part of the contributions amount to R20 000 x 33.3% = R6 660.
- Mr X’s total medical expense would be R24 000 + R20 000 = R44 000. This means that the total credit he is allowed is 6168 + 1830 +6660 = 14 658.
“Sars doesn’t look at employer vs employee contributions when they calculate individuals’ medical aid tax credits,” concludes Van Wyk. “They only look at the total amount.”
This article first appeared on HR Pulse.