Organisation : South African Revenue Service [SARS]
Facility Name : Medical Scheme Fees Tax Credit (MTC)
Applicable For : Taxpayer
Country : South Africa
Website : https://www.sars.gov.za/types-of-tax/personal-income-tax/medical-credits/
What is Medical Scheme Fees 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).
Related / Similar Facility : SARS Tax Free Investments
Who is it For?
The MTC applies to fees paid by a taxpayer to a registered medical scheme (or similar fund outside South Africa) for that taxpayer and any “dependants” (as defined in section 6B(1) of the Income Tax Act, 1962). This MTC seeks to bring about greater fairness and help achieve greater equality in the treatment of medical expenses across all income groups.
The MTC is a fixed monthly amount which increases according to the number of dependants:
| 2021/2022 year of assessment
(1 March 2021 – 28 February 2022)
|
2020/2021 year of assessment
(1 March 2020 – 28 February 2021)
|
2019/2020 year of assessment
(1 March 2019 – 29 February 2020)
|
| R332 per month for the taxpayer who paid the medical scheme contributions; or for a dependant who is a member or a dependant of a member of a medical scheme or fund, where the taxpayer him- or herself is not a member of a medical scheme or fund. | R319 per month for the taxpayer who paid the medical scheme contributions; or for a dependant who is a member or a dependant of a member of a medical scheme or fund, where the taxpayer him- or herself is not a member of a medical scheme or fund. | R310 per month for the taxpayer who paid the medical scheme contributions; or for a dependant who is a member or a dependant of a member of a medical scheme or fund, where the taxpayer him- or herself is not a member of a medical scheme or fund. |
| R664 per month for the taxpayer and one dependant; or R664 in respect of two dependants where the taxpayer him- or herself is not a member of a medical scheme or fund. | R638 per month for the taxpayer and one dependant; or R638 in respect of two dependants where the taxpayer him- or herself is not a member of a medical scheme or fund. | R620 per month for the taxpayer and one dependant; or R620 in respect of two dependants where the taxpayer him- or herself is not a member of a medical scheme or fund. |
| R224 per month for each additional dependant | R215 per month for each additional dependant | R209 per month for each additional dependant |
How Does It Work?
** The MTC will effectively impact both the employer and the employee. This credit must be taken into account by the employer when calculating the amount of employees’ tax to be deducted or withheld from the employees’ remuneration.
** Individuals who have not had their MTC taken into account by an employer (for example, an individual who is retired and receives a pension; or an individual who is self-employed) can claim the MTC on assessment by submission of an annual income tax return.
** In addition to the MTC, an individual may also claim an Additional Medical Expenses Tax Credit for certain qualifying medical expenses, subject to limitation. See more information on claiming these medical expenses (Additional Medical Expenses Tax Credit). Also refer to the Guide on the Determination of Medical Tax Credits for further information.
FAQs On Medical Scheme Fees Tax Credit
Frequently Asked Questions FAQs On Medical Scheme Fees Tax Credit
What is “deemed medical contributions”?
Medical contributions paid by an employer for the benefit of an employee to a registered medical scheme will result in a taxable benefit in the hands of the employee. Although regarded as a fringe benefit (and thus gross income), the amount will also be regarded as a “deemed contribution” made by the employee, and will be added to the total contributions made by the employee. This would then be considered for deduction. Contributions paid by the estate of a deceased taxpayer up to date of death are also regarded as having been paid by the taxpayer on the day before his/her date of death.
Why has there been a change from medical tax deductions to medical tax credits?
The system of tax credits is fairer. All taxpayers, regardless of their level of income, derive an equal tax benefit because tax credits are fixed and are deductible against the normal tax payable, as opposed to simply reducing the taxable income. With the previous system of medical aid contributions, the higher the taxpayer’s income, the higher the tax benefit.
I pay contributions to a medical scheme but the medical tax certificate is not in my name and I have been selected for audit. Which supporting documents must I submit?
You need to submit an affidavit stating that the main member is a dependant as defined (that is, either your spouse; a child (or spouse’s child); any family member in respect of whom you are liable for family care and support). In addition, the following documentary proof: proof of payment (which can be either a bank statement showing the payments to the medical scheme or a letter from the medical scheme confirming that you are the one making the payments on behalf of the main member/dependant.