Author: Johan Swart

New tax rebate rules give low income earners some welcome relief

An increase in the tax rebate on medical contributions effective for the 2014 tax year gives low income earners some slight but welcome relief in an environment where direct and indirect taxes seem to be climbing every year.

So says Johan Swart, tax manager at Legal & Tax. He says that the increase in the rebates will put a few more rand in the average earner’s pocket every month, potentially adding up to a few hundred rand a year in tax rebates for a taxpayer paying for medical cover for himself or herself, a spouse and a few children.

The increase in the rebates is as follows:

  • From R230 to R245 for the first two members.
  • From R154 to R 162 for each additional member.

In a family of four where the principal member pays for R2 000 of medical cover per month, the rebate would be as follows:

2 x R245 for the first two members = R490


2 x R162 for the two additional members = R324

EQUALS a total rebate of R814.00 per month.

Over the year, that would add up to a total tax deduction of R9 768. In the previous tax year, the total allowable tax deduction would have been R9 216.

Says Swart: “The way the tax credit system for contributions to a medical aid works means that the tax benefit is more beneficial the lower your taxable income. That is helping to make medical cover more affordable for lower earners.”

The only condition of the rebate is that your medical aid contribution cannot be less than the amount of the rebate. In that case, your rebate would be equal to the amount you contribute to the medical aid. So, if you only pay R600 per month for medical cover for a family of four, you can only claim a total rebate of R600.

In addition, you can declare all medical expenses not covered by the medical aid fund in your annual tax return. These expenses are deducted from your taxable income subject to a limitation imposed by SARS.

Swart says the following rules apply:

  • All medical expenses incurred by those older than 65 will be deducted from their income before the calculation of their tax liability.
  • Proof of all medical expenses claimed must be available at the request of SARS.
  • SARS will only accept medical expenses from registered medical practitioners and medication prescribed by registered medical practitioners as legitimate expenses.
  • SARS has a relatively wide definition of medical practitioners that includes the likes physiotherapists and homeopaths.

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