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Guide on the Determination of Medical Tax Credits

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Guide on the Determination of Medical Tax Credits (Issue 9) 20 Out-of-pocket expenses may not be taken into account for employees' tax purposes. 35 Taxpayers who have not had their AMTC taken into account for employees' tax purposes may submit a tax return to SARS to take advantage of the AMTC. 3.6.2 Taxpayers with a disability Section 6B(3)(b) recognises, as qualifying medical expenditure, amounts (other than expenditure recoverable by the taxpayer or his or her spouse) necessarily incurred and paid by the taxpayer in consequence of a disability suffered by him or her, his or her spouse or his or her child. The following AMTC may be claimed in respect of qualifying medical expenditure paid during the year of assessment: 36 • 33,3% of the fees paid to a medical scheme or qualifying foreign fund as exceeds three times the amount of the MTC 37 to which that person is entitled; plus • 33,3% of qualifying medical expenses 38 paid (out-of-pocket expenses). To simplify this calculation, the following formula can be used: 33,3% × {[A – (3 × B)] + C} in which formula— "A" represents fees paid to a medical scheme or qualifying foreign fund for the year of assessment; "B" represents the MTC for the year of assessment; and "C" represents all qualifying medical expenses paid during the year of assessment, including disability expenditure. Example 14 – Calculation of the AMTC for a person with disability Facts: During the 2018 year of assessment, Y (aged 34) earned a salary of R280 000 (excluding any taxable benefit). Y contributed R46 900 towards ABC Medical Aid Scheme, of which the employer paid R24 000. Y's employer withheld employees' tax of R40 864 from Y's remuneration of R304 000 (R280 000 + R24 000), after accounting for the MTC. Y has an ITR-DD, completed and signed by a duly registered medical practitioner, confirming that Y's 4-year old daughter is a person with a disability, since she has a moderate-to-severe hearing impairment in both ears. Y claims R32 691 [Note 1] for two hearing aids for the daughter and also other allowable out-of-pocket medical expenses of R9 232. Y has kept proof of all expenses, and is the main member on the ABC Medical Aid Fund, with two dependants – a spouse and daughter. All amounts were correctly reflected on Y's IRP5 certificate, and Y was not entitled to any exemption or deduction during the 2018 year of assessment. 35 Paragraph 9(6) of the Fourth Schedule only permits an employer to take into account the AMTC contemplated in section 6B(3)(a)(i), and not the AMTC contemplated in section 6B(3)(a)(ii). 36 Section 6B(3)(b). 37 Section 6A(2)(b). 38 Section 6B(1), definition of "qualifying medical expenses".

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