Share

Save money with medical aid tax relief

Consumers short of money got some welcome relief from the budget this year when the minister of finance announced a new way of giving low and middle income taxpayers tax relief on their medical aid costs. You should be looking at the impact of this change to taxation to see if and how it benefits you.

From 1 March this year, personal income taxpayers started to receive a tax rebate for medical aid expenses rather than having a deduction of allowable medical aid contributions deducted from their monthly income. A rebate is an amount deducted from your final payable tax, while a deduction is an amount that lowers your taxable income.

Let’s look at this concept by means of an example. You and your spouse are members of your medical aid scheme. In the past, if you earned R10,000 a month,  you were allowed a medical tax aid deduction of up to R1 440  a month. This would bring your taxable income down to R8 560, leaving you with a total monthly tax payable of    R 587 (we’re assuming, just for the sake of the example, that you are not contributing to a pension).

Now, under the new credit system, you will receive a monthly tax credit of R230 for the first two beneficiaries on your medical aid and R154 for each additional dependant. This means that your tax will be calculated on the whole R10,000, resulting in tax of R 847. 

If there are two beneficiaries on your medical aid, you will receive a rebate of R460, leaving you with a monthly tax bill of R387 – a saving in tax of R 200 per month. The higher your income however, the smaller this saving will be, as tax is calculated on a sliding scale. This was done firstly to give low and middle income earners tax relief with regards to medical expenses, and to help finance the new National Health Insurance by collecting slightly more tax from higher income earners.

So what does this mean for you? If you are earning less than R346 000 a year (less than R28 000 per month), you will be paying a little less tax each year while anyone earning more than R346 000 will pay a little more. If you earn less than R346,000 a year, you may already  be benefitting each month thanks to a change in the medical aid tax credit system.

It may help to soften the blow of the e-tolls a bit if you live in Gauteng or allow you to save a little money if you are lucky. Or it might be the case that this new approach to medical aid tax credits has made it more affordable for you to join a medical aid. Now you need to take the new rebates into account when deciding whether to get medical aid and which plan to get.

With the new tax rebate, it is worth reviewing whether you can afford medical aid cover if you do not belong to a medical aid scheme already. Illness and accidents can strike at any time and they can be devastating for your finances.  Medical seems expensive – until you or your family need it.

*For more information on Legal & Tax, visit http://www.legalandtax.co.za, call 0860 LTS LTS (587 587) or email info@legalandtax.co.za.

Follow us @LegalandTax on Twitter or join us on Facebook to keep up with Legal & Tax news and views.

Follow Women24 on Twitter.

 
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE