What are the benefits to belonging to a medical aid from a tax perspective?

What are the benefits to belonging to a medical aid from a tax perspective?

Most people cannot afford belonging to a medical scheme. For this reason SARS introduced the medical scheme fees tax credit. When calculating how much your tax will cost you per month you should also include the tax benefit. I will therefore explain the benefit of the tax credits by applying it to an example.

First of all it is important to know that there are two rebates from SARS that affects your income tax. The 1st one is known as: Medical Scheme Fees Tax Credit “MTC” and the 2nd as Additional Medical Expenses Tax Credit "AMTC". Only the first one (the MTC) will influence your cash flow every month. Both of these tax credits will however influence the amount of your tax liability/refund. I will gladly assist you in calculating your rebate. Please do not hesitate to contact me.

The Medical Scheme Fees Tax Credit “MTC” is a rebate that reduces your normal tax liability. If you are this a salary earner it will reduce the PAYE you need to pay every month with the rebate amount. This effectively means more money for you as you do not need to pay SARS.

How much is the rebate?

R286 per month for the taxpayer who paid the medical scheme contributions
R286 per month for the first dependant
R192 per month for each additional dependant(s)

 

Let me explain: Say you are a family of four:  a mom, a dad and two children. You are a salary earner paying R1200 a month on PAYE. You get a quotation from a medical aid that it will cost you R3500,00 per month to belong to the scheme - how much will it really cost you?

FAMILY OF FOUR

BUDGET IS TIGHT

HOW MUCH WILL THE R3500 PER MONTH MEDICAL AID ACTUALLY COST?

 

 Your rebate will be R286 + R286 + R192 (x2) = R956. This means you will pay R956 less PAYE per month (R1200 – R956).

It will effectively mean that you are only paying R2544 per month for the benefit to belong to a medical aid.

I would not like to go into much detail of the benefits of belonging to a medical aid. We all know that to have access to private medical care (instead of having to rely on public health services), is priceless.

In my next article I will explain the working of the Additional Medical Expenses Tax Credit.

If any queries - please do not hesitate to contact me.

Tax cycle

General tax questions - answered

In my first article about income tax I would like to address the general questions asked about tax and give some administrative details.

The first question is: Do I need to pay tax?

The short answer for this is that if you receive income from more than one source (salary, interest, fees, commission, etc.) you need to submit a tax return.

According to SARS if you earn less than R350 000 (before tax) a year from one source and do not want to claim any deductions (medical expenses or retirement annuities), then you do not need to submit a tax return.

My personal feeling is that if you paid tax during the year, then submit a return.

How do I submit a return?

You can submit your tax return at a SARS branch. Alternatively you can self admit through e-filling. The last option is to let your tax practitioner submit your return on your behalf. I would like to encourage you to make use of my services as a tax practitioner.

What if I am not registered as a taxpayer?

You must be registered as a taxpayer before you can submit a tax return. Unfortunately this can only be done at a SARS branch.

The following supporting documentation should be taken with you:

1.       Proof of Identity. Take your ID with a certified copy with you.

2.       Proof of bank details. Original letter of bank/ original bank statements not older than 30 days.

3.       Proof of address. There are various documents that SARS allow. Please see their website if unsure. Important is that the document should clearly state the taxpayer name (or initials) and surname and the physical address.

What if I am late with prior period returns or owe SARS outstanding taxes?

It is important to submit returns on time. There are different penalties and interest that SARS can charge on outstanding returns.

My advice is to rectify your situation as quickly as possible by submitting outstanding returns and then to make arrangements with SARS for paying the outstanding taxes. Doing this will avoid administrative penalties. In the long run this is the better option. SARS are committed to help taxpayers who contact their Debt Management department.

How do I pay my outstanding taxes?

You can make payments to SARS at a Bank, via e Filling or by electronic transfer. If unsure please contact me for assistance.

I have tried to deal with the general issues regarding the administration of income tax returns. Please forward this article to someone you know that may need assistance.

If you have any query please do not hesitate to contact me. As always my best personal service is promised.

Kind Regards,

Tax season 2017

Tax season 2017 is upon us. With this in mind I decided to write a few articles that will be posted over the next few days, giving advice and general information that could help my valued customers.

Please follow the articles. Even better describe to my blog to receive updates via e-mail.

Tax need not be complicated, with this in mind it is better to use a tax practitioner to help you with your return. A tax practitioner can give advice and handle all the paper work and correspondence with SARS. Making the submission of your return as easy possible.

For any advice please do not hesitate to contact me.

083 577 4571