24 February 2009

New tax dispensation

A new tax dispensation with regard to medical scheme contributions is currently being investigated.

A new tax dispensation with regard to medical scheme contributions is currently being investigated.

In preparation for the new dispensation, contributions to medical schemes will not qualify as a fringe benefit in a remuneration package in future, Mr Trevor Manuel, the minister of finance, announced in his recent budget speech.

All contribution paid by an employer will be deemed taxable, but the employee will be able to claim a tax deduction or a credit for contributions made, up to the limit as adjusted in the budget.

From 1 March 2009 the monthly limit for tax-deductible contributions will be increased from R570 tot R625 for each of the first two beneficiaries and from R345 to R380 for every additional beneficiary.

This is an adjustment for inflation of the limits set in 2006, says Ms Heidi Kruger, spokesperson of the Board of Healthcare Funders.

The possibility of replacing the deduction of medical scheme contributions with a non-refundable tax credit is currently being investigated.

The credit will amount to about 30% of the current deduction.

In instances where the individual pays for medical expenses (in addition to the medical scheme contributions) and these qualify for a deduction, the credit will also be 30% of the permissible deduction.

A discussion document will be issued in 2009 to ensure the proposals are in line with the new health-care policy, said Manuel.

Everyone in the medical industry approached for comment said it was premature and that they were waiting for the discussion document.

The proposed tax credit system will only be introduced in two years' time to give employers en payroll providers enough time to implement the necessary adjustments to the administrative systems, Manual stated.

Disabled persons may still deduct all qualifying expenses without any restriction. Taxpayers must keep proper records of their medical expenses. It is always better for the spouse with the lower income or the one older than 65 years to incur the medical expenses, for then the permissible deductions are higher.

When completing a tax return, you must make sure the expenses were in fact paid in that particular year of assessment.

(Fanus Gous, Sake Rapport, February 2009)


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