Medical Tax Credits - All you need to know...
Understanding Medical Tax Credits
This article will have a look at what Medical Scheme Fees Tax Credits are and what the 2022 / 2023 and 2023 / 2024 Medical Scheme Fees Tax Credit rates are.
What is a Medical Tax Credit
A Medical Scheme Fees Tax Credit (also known as an “MTC”) is a rebate which, in itself, is non-refundable, but which is used to reduce the normal tax a person pays. Any portion that is not allowed in the current year (usually that amount which exceeds the normal tax payable) cannot be carried over to the next year of assessment.
The MTC applies for years of assessment starting on or after 1 March 2012 (from the 2013 year of assessment), and seeks to bring about greater fairness and help achieve greater equality in the treatment of medical expenses across all income groups.
The MTC rebate applies to the fees that you pay to a registered medical scheme in South Africa (or similar fund outside South Africa). This includes the fees that you pay on behalf of yourself and your registered dependents. It is a fixed monthly amount and increases according to the number of dependants on the medical scheme.
If your medical scheme contributions are paid via your employer, i.e., as a deduction from your salary or wages, your employer will adjust your monthly PAYE tax accordingly
The MTC consists of two amounts, namely:
- The medical scheme fees tax credit; and
- The additional medical expenses tax credit (if any)
2023 / 2024 Medical Scheme Fees Tax Credit rates
Medical Tax Credits [Rands Per Month] | 2023/2024 | 2022/2023 |
For the taxpayer who paid the medical scheme contributions | R 364 | R 347 |
For the first dependent | R 364 | R 347 |
For each additional dependent(s) | R 246 | R 234 |
Example - Applying the Medical Tax Credit against monthly PAYE
John, 25 years old, has worked for his employer since 1 March 2022 and earns R 25 000 per month, the tax on which is usually R1 691.25 per month. He belongs to a registered medical aid with a monthly premium of R2 500. The payment of the medical aid premium is administered by the company, but there is no employer contribution. The medical aid plan covers him, his wife and their child.
The MTC impacts the PAYE due as follows:
Step | Amount [R] | Workings |
Step 1: Calculate the PAYE before MTC | 1 691.25 | Given |
Step 2: Calculate the monthly MTC for 3 members | 928.00 | R694 + R234 |
Step 3: Calculate the PAYE liability after MTC | 763.25 | R1 691.25 – R928 |
As can be seen, the MTC reduces John’s PAYE liability – he will pay R762.25 per month instead of R1 691.25 per month.
What is the additional medical expenses tax credit?
What is the additional medical expenses tax credit?
This is a second medical tax rebate MTC rebate where the overall amount of tax you need to pay at the end of the tax year may be reduced. This rebate refers to the sum of all the additional expenses (out-of-pocket expenses) you have spent on qualifying medical expenses in a particular financial year that weren’t covered by your medical scheme.
The additional medical expenses tax credit offers tax relief in respect of certain qualifying medical expenses that are not covered by a medical scheme. Available credits depend on the main member’s age, and whether he / she / or a dependant has a physical impairment or disability.
Qualifying out-of-pocket medical expenses
Only certain out-of-pocket medical expenses qualify to be included in this MTC rebate. These are:
- Consultations, medical services and medications from a registered medical practitioner, dentist, orthopedist, physiotherapist, optometrist, osteopath, chiropractor, herbalist, homoeopath or naturopath.
- Admission to a registered hospital or nursing home.
- Home-care by a registered nurse, nursing assistant, nursing agency or midwife.
- Medicines prescribed by a duly registered physician and acquired from a duly registered pharmacist.
- Medical expenses incurred outside of South Africa and which are largely similar to the services and medicines listed above.
- Money paid towards the treatment of a physical impairment or disability, on condition that it is one of the qualifying expense prescribed by the Commissioner.
Unless specifically prescribed by a registered medical practitioner and acquired from a pharmacist, over-the-counter medicines (such as cough syrups, headache tablets or vitamins) do not qualify as medical expenses.
What counts as a disability?
Qualifying disabilities include moderate to severe mental, physical, hearing, intellectual, communication or vision disabilities. You and a registered medical professional must complete and submit and “ITR-DD form” in order to qualify as having a disability
Reporting
Medical Scheme Fees Tax Credits are reported under code 4116 on an employee’s IRP5 / IT3(a). The total value reported under this code should be equal to the amount that PAYE was reduced by.
More information on Medical Tax Credits can be found on SARS’ website here.
