Medical Aid

Medical Aid

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medicalaidHelfin can assist you in planning for a healthy future through the right medical aid package for you and your family.

 

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Tax claims from medical expenses

With ever-increasing medical aid contributions, doctors and dentists’ bills, as well as the escalating cost of medication, it is important to know what tax relief is available to taxpayers in the form of medical deductions.

Only amounts actually paid by tax payers in respect of themselves, their spouses and qualifying children and stepchildren are deductible. Apart from the normal medical expenses, other qualifying medical expenses will include payments to homeopaths, osteopaths, physiotherapists, herbalist’s orthoptists and nursing homes. The claim is limited to the extent that it exceeds 7,5% of the taxpayer’s taxable income (before this deduction), unless the taxpayer has reached the age of 65 years or qualifies for the concession available to taxpayers who are disabled or who have a spouse or child with a disability.

Taxpayers do not have to submit proof of the medical expenses claimed, but must retain the information in case the South African Revenue Service requests this.

Where medical expenses that are substantially the same as medical expenses that would have been deductible if incurred in South Africa, were incurred outside the Republic, such expenses will also be deductible unless the taxpayer was reimbursed for the expenses.

From the 1st of March 2014 a medical Scheme fees tax credit will be introduced.  A rebate, to be known as the medical scheme fees tax credit must be deducted from the normal tax payable by a taxpayer who is a natural person.

From March 2014 – the 2015 tax year

From 1 March 2014 taxpayers will be subject to a new system which allows only tax credits. Therefore it will no longer be allowed for any deductions against Income Earned, but only tax credits that reduce Tax Payable.

 

Taxpayers Under 65:  Taxpayers Over 65 Or With Disabled Dependents:
Fixed credit per month of R257 (2015 tax year) per dependent for dependents 1 and 2, and R172 (2015 tax year) for dependents 3, 4, 5 etc. PLUS - IF their medical aid contribution is greater than 4x the above credit, THEN (that difference + Out of pocket medical expenses) less an amount equal to 7.5% of your Taxable Income multiplied by 25% is allowed as a further credit to reduce Tax Payable.
Fixed credit per month of R257 (2015 tax year) per dependent for dependents 1 and 2, and R172 (2015 tax year) for dependents 3, 4, 5 etc. (same as above) PLUS - IF their medical aid contribution is greater than 3x the above credit, THEN (that difference + Out of pocket medical expenses) multiplied by 33.3% is allowed as a further credit to reduce Tax Payable.

Where an employer makes a contribution or payment to a medical scheme on behalf of his or her employee, and this contribution exceeds two thirds of the total contribution, this portion is seen as a taxable benefit to the employee and is therefore taxable. Contributions to medical aid schemes may include premiums for savings plans or other facilities. Some of these premiums are fully taxable in the hands of the employee, while others are only partially taxable.

A taxpayer who falls into this category may only claim expenses that were not covered by the medical aid, and contributions that were not paid by the employer. The total claim will be limited to the limitation as set out above, unless the taxpayer qualities for the disability concession. Contributions made by an employer that form part of an employee’s taxable amount are not deductible for tax purposes.

A taxpayer who makes his or her own contributions to a medical aid independently of an employer may claim the full contributions to the medical aid as well as all medical expenses not covered by the medical aid. The total claim will be limited to an amount as set out above, unless the taxpayer qualifies for the disability concession. Taxpayers who do not belong to a medical aid will be able to claim all medical expenses, subject to the above-mentioned limits.

Taxpayers who are over the age of 65 on the last day of February may claim all their medical expenses as deductions against income in that tax year.

The person who pays the expenses may claim the deduction. For tax purposes, spouses or persons who quality as spouses in terms of the definition of a spouse in the Income Tax Act should therefore rather have one spouse pay all the medical expenses and not split them. The spouse with the lowest income will have a smaller disallowed portion than the spouse with a higher income. A taxpayer who qualities as a “handicapped person” may claim the excess of the sum of all qualifying outlays over R500. Even if no expenditure has actually been incurred in respect of the handicapped person, all medical expenses paid by the taxpayer will still remain deductible. Deductible expenses are not limited to medical expenses and any expenditure necessarily incurred as a result of a disability is allowed as a deduction.


Changes that will come into effect from 1 March 2014

      • "It is proposed that the remaining aspects of the deduction system for medical expenses be replaced with the tax credit system in respect of all medical scheme contributions and qualifying medical expenses for all taxpayers. Under this system, a set level of credits will be allowed for medical aid contributions (with annual upward adjustments), with certain excess contributions and out-of-pocket expenses also eligible for tax credits (instead of deductions). "
      • "All credits will remain non-refundable. Like the current system for deductions, application of the tax credit system will fall into three categories: (i) taxpayers of age 65 and above, (ii) taxpayers with a disability factor under age 65 and (iii) all remaining taxpayers. "

 

"It is proposed that taxpayers of 65 years of age and above will become entitled to medical expenses tax credits in lieu of the current deduction system for all medical-related items. Other than the standard monthly medical scheme credits, the credits will generally be set at a 33.3 per cent level. More specifically, the medical credits will be calculated as follows:

      • The standard monthly medical scheme credits for the taxpayer, spouse and dependents;
      • 33.3 per cent credits for medical scheme fees that exceed three times the standard medical scheme credits; and
      • 33.3 per cent credits for all qualifying medical expenses (other than medical scheme contributions). "


Like current law, a separate calculation exists for taxpayers below 65 years of age if the taxpayer, his/her spouse and/or child is a person with a disability. Other than the standard monthly medical scheme credits, the credits will generally be set at a 33.3 per cent level. More specifically, the medical credits will be calculated as follows:

      • The standard monthly medical scheme credits for the taxpayer, spouse and dependents;
      • 33.3 per cent credits for medical scheme fees that exceed three times the standard medical scheme credits; and
      • 33.3 per cent credits for all qualifying medical expenses (other than medical scheme contributions).


Like current law, a separate calculation exists for taxpayers below 65 years of age in the residual category (if the taxpayer, spouse or children are not persons with a disability)

      • These credits will generally be set at a 25 per cent level. More specifically, these medical credits will be calculated as follows:
      • The standard monthly medical scheme credits for the taxpayer, spouse and dependents; and
      • 25 per cent credits of the value of the amount by which the aggregate of the medical scheme fees that exceed four times the standard medical scheme credits, and all qualifying medical expenses (other than medical scheme contributions), exceed 7.5 per cent of the taxpayer's taxable income.

WHAT IS “MEDICAL GAP COVER”?

You should never assume that your medical scheme will cover the full cost for operations and procedures done in hospital. Medical schemes pay doctors and specialists at a rate of between 100% and 300%, but the reality is that many medical practitioners charge in excess of these rates which could result in a gap between the actual cost and the amount that the medical schemes pay. You will be held liable for this shortfall.

Furthermore, medical schemes may impose upfront co-payments for certain in- and out-of-hospital procedures, depending on your medical scheme option, these co-payments are either payable from your medical savings account or as an out-of-pocket expense.

With our chosen GAP cover policy, these unforeseen medical expenses could be taken care of through a variety of options, for an affordable premium per month.

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