Medical Aid

[Wiele]

In their infinite wisdom, SARS has decided to reduce the "rebates" (tax credits) on Medical Aid contributions from R720 each for the first 2 members to R216 each, and from R440 each per dependent thereafter to R144 each, w.e.f. 1 March 2012.

This will mean that the difference between these amounts (depending on the number of members on your medical aid) will be taxed at your marginal rate.

This was sent to my wife by her employer, but how will this effect business or is it just effeting employers

[Dave A]

how will this effect business or is it just effeting employers

Did you perhaps intend "employees" at the end there?

Apparently businesses will now be declaring their contribution (if they make one) as a fringe benefit to the employee. The exception is persons over the age of 65, and that in turn differentiates between... OK - let's not get sidetracked now

The "justification" in the notice sent out by SARS is near laughable.

I quote:

What is the purpose of this conversion?

The purpose of the conversion is to achieve fairness, as tax relief should be impartial across income groups and fair in proportion to the average direct government spending on health services available to people without medical scheme cover.

It's political speak for something or other, but the bottom line is the tax deductible allowance for medical aid has been drastically reduced.

[geraldenek]

Their explanation for the conversion should have read something like - Higher income groups should receive a reduced deduction for medical in order for the government to utilise this money towards health services to people without medical aid.

As this reduction is not fair towards higher income groups.

[Dave A]

Also if tax relief should be impartial across income groups, doesn't the same argument apply to taxation?

[AmithS]

Exactly my thinking when I read the letter from SARS sent to my business.

To achieve fairness, no matter how much you earn from now on there will be a flat tax rate for all tax groups!

Absolute joke as they think we are that gullible!

[Nickolai Naydenov]

This intends to get higher taxes from higher earning employees, in other words they trying to equilize the income of all people, it will eventually get to a place where people won't care to study because the skilled people will pay so much taxes that they will be the same as the unskilled and uneducated ones that pay no taxes, it's a complete joke.

At the moment contributions made towards employee benefits such as med aid, policies and etc is calculated CTC, however from the new tax year there will be frindge tax benefits on those which is ridiculous and makes no sense, so to avoid that, let your employer stop payments toward your policies and let them give you a full salary, then you pay for your policies and get SARS to refund you at the end of the finacial year.

[BusNavig8]

Medical Aid Deductions I Refer to as "RDP" claims in any event - How many of SA' have these claims actually other than the capping. The formula states that the first 7.5% of your nett taxable income is your medical threshold, so anything above that is claimable. So basically the less you earn the less the threshold, the more the likelihood of a claim. The new medical law does not seem to have changed this section of the formula, and only changed the medical aid capping and the taxation of the fringe benefits. The medical deductiblity has been unfair for years and years and it has merely become more unfair. Even if you were entitled to a full claim and the 7.5% formula were not there and you paid say R20000 for an eye op them you would only have received R3600 back on an 18% rate of tax to a max of R8000 at max marginal rate. (Furthermore, In reality max marginal rate tax payers usually dont get anything due to the Formula's so they are on their own!) In my opinion the new structure is not aimed so much at equality but at something entirely different, a SARS style of different

[Dave A]

The formula states that the first 7.5% of your nett taxable income is your medical threshold, so anything above that is claimable. So basically the less you earn the less the threshold, the more the likelihood of a claim.

What I used to do was send the whole family to the dentist in the same year to have all their expensive stuff done to give myself the best chance of some level of "tax efficiency".

The new medical law does not seem to have changed this section of the formula, and only changed the medical aid capping and the taxation of the fringe benefits.

Thanks - I was wondering about that.

[jasonpat]

Reducing the tax credits on medicals aid is good step by the government.

[Dave A]

Reducing the tax credits on medicals aid is good step by the government.

Would you care to explain your reasoning behind that statement, please.