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Thread: Medical Tax Credit

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    Medical Tax Credit

    Medical Tax Credit
    Hi

    I am not sure if I am understanding the medical Tax Credit correctly.
    I have it as:

    If you belong to a medical aid (not sure if a hospital plan) also counts??? and you have 2 dependents then you can deduct from your monthly PAYE the amount of R230+R230+R154 = R614? Have I got it right?
    If I pay a pension fund an amount of R450 per month is there any PAYE deduction that can be made monthly?

    These deductions are not paid over by our company but the employees themselves.

    Hope you can help me with this one.

    Regards
    Stephanie

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    Hi Stephanie,
    Hospital plan still counts. The R450 will be deducted from your salary before you get taxed, the remaining amount will be taxed at your marginal rate of tax then you will receive credit(money paid back ) for your medical aid contributions. Let's do an example: let's say your salary is R20 000 pm that means that R20 000 - R450 = R 19 550, that amount will then be taxed at your tax rate let's just say it's R2000 therefore your net will be R17 550. Now you will pay say R3000 for medical aid for the 3 of you whcih means you are left with R 14 550, then you will add the credits to your income the R614 in question and you will end up with net of R15 164. I hope this makes sense, if it doesn't PM me your exact figures and I'll do calculation for you.

    These amounts could be added to your payslip so that you will getthe tax benefit on a monthly basis or you can claim them back when you doing your tax returns.

    Just a question the pension fund that you talking about, is it actually a pension fund or provident fund or retirement annuity? I'm asking so that I can give you a better advice and besides if it is a retirement annuity that means that you will be paying fringe benefit tax as well. From gour post I have the impression that you are not clear at all with what is happening so if you like PM me your number and when I'm at my office I will give you 5min over the phone to try and help you and please don't worry there will be no charge whatsoever, I'm more than happy to help
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    Medical Aid Tax Credits - PAYE working on salary

    Hi there Nickolai,
    I don't agree with the way you calculate the paye... according to what I understand one would take the Gross salary (say R20000), work out the PAYE on that and then deduct the R614 (R230 + R230 + R154) from the PAYE amount... This would work out: R20 000 less PAYE R3113.31 - less R614 (medical tax credit) - less UIF 124.78 = 17375.91 net pay.

    The medical tax credit will be treated by SARS the same as the tax rebates.. No "credits" will be paid out in money.

    Thanks
    Christel

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by ChristelACS View Post
    Hi there Nickolai,
    I don't agree with the way you calculate the paye... according to what I understand one would take the Gross salary (say R20000), work out the PAYE on that and then deduct the R614 (R230 + R230 + R154) from the PAYE amount... This would work out: R20 000 less PAYE R3113.31 - less R614 (medical tax credit) - less UIF 124.78 = 17375.91 net pay.

    The medical tax credit will be treated by SARS the same as the tax rebates.. No "credits" will be paid out in money.
    I'd love to know who is right on this one - there's a big difference in interpretation here
    The trouble with opportunity is it normally comes dressed up as work.

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    Nickolai Naydenov (14-Mar-12)

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    You can go get the facts for yourself, a good source would be www.sars.org.za If you like I can email you new tax tables, budget speech, I can even post you one of those SARS books that they release every year which explains what works how and etc

    What you've done in your calculation is exactly what I said so I don't see what you not agreeing with?

    Then you saying that rebates and credits are the same thing, no they are not. The rebates on medical aid were R720 per adult member, then your total income would be deducted by the R720 and then you would be taxed, so in other words even if your medical aid costed you R2000 you would get R720 tax deductuble. The credits now are actual money back, so yes big difference between rebates abd credits, besides if they were the same things why call them different name? Why do you have ro confuse people when the correct answer was given.

    Dave you creating drama here hahaha...
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    Site Caretaker Dave A's Avatar
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    Just looking for clarity, Nickolai. I felt it was too easy to confuse the medical tax credit handling with the retirement funding handling
    The trouble with opportunity is it normally comes dressed up as work.

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    Oh ok, I thought you were laughing at the fact that the calculation and what I posted was the same lol...

    Retirement: Maximum of 15% of your NRFI(non-retirement funding income) is tax deductible, so an annual salary of R240 000 will give you R36 000 that you can spend on retirement annuity for which you wont be taxed, that means that 240 000 - 36 000 = 204 000 so the tax you pay will be paid on the 204 000. If you spend less on retirement annuity let's say 12 000 per annum then the calculation will be 240 000 - 12 000 = 228 000 which will be taxed at your marginal rate of tax.
    If you have a retirement corporate fund than maximum tax deductuble amount is 7.5% and your income is then RFI(retirement funding income) so if we work on the same figures 240 000 @ 7.5% = 18 000 which will be your maximum tax deductible amount. Just remember that many employees have a lower pensionable salary than what their real salary is, so if we use the above number of 240 000 per annum the employee can have say R150 000 RFI and the rest R90 000 will be NRFI. That means they can work those amounts out as per the above explanation, but you'll just have to do the two calculations.

    Now medical aid credits I have already explained how it works, so add in the medical aid credits to your income and you will get the net pay.

    I hope that cleares it up for you.
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    Red face

    Quote Originally Posted by Nickolai Naydenov View Post
    You can go get the facts for yourself, a good source would be www.sars.org.za If you like I can email you new tax tables, budget speech, I can even post you one of those SARS books that they release every year which explains what works how and etc

    What you've done in your calculation is exactly what I said so I don't see what you not agreeing with?

    Then you saying that rebates and credits are the same thing, no they are not. The rebates on medical aid were R720 per adult member, then your total income would be deducted by the R720 and then you would be taxed, so in other words even if your medical aid costed you R2000 you would get R720 tax deductuble. The credits now are actual money back, so yes big difference between rebates abd credits, besides if they were the same things why call them different name? Why do you have ro confuse people when the correct answer was given.

    Dave you creating drama here hahaha...


    Hi Nickolai, Sorry for causing confusion.... Yes, I have misread your email in that I thought the R450 you spoke about was the medical tax credit.... my mistake. BUT... the rebates I referred to was the Tax Rebate that SARS give to people... not the Medical rebates as per 2012 year. SARS will NOT pay you out your Tax Credits if it let you go into credit on your tax assessment... This is where they will be treating it the same as the tax rebates. You will thus lose out on those "extra" credits ... (The current tax rebates are: Below age 65: R11440; Age 65 to below 75: R6390 and age 75 and over R2130)

    Also w.r.t. Hospital plans - only those that issues a tax certificate will be treated the same as medical aids... those with no certificates... = no credits. There are a few that don't issue tax certificates. People should enquire upfront.

    Eish... I hope you accept my appology for creating the confusion.
    Christel

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    Ok, the tax rebates you are talking about are the standard annual rebates and not medical aid rebates as I thought you were mentioning, do that's out of the way then.

    All hospital plans will give you tax certificate. However if you take a hospital insurance plan that's different and no tax can be deducted.

    Not a problem at all Christel

    http://www.sars.gov.za/Tools/Documen...p?FileID=75352 that's in case somebody wants to read the sars document lol...
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    Thank you Nickolai and Christel. Your input was amazing.

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