1. Introduction of medical aid tax
credits
Effective 1 March 2012, new tax legislation
replaces the previous medical aid deductions with monthly tax credits. All
taxpayers under 65 years of age will now receive a monthly tax credit for
medical contributions provided they have made contributions to a medical
aid. The monthly tax credit will comprise of R230 for the member and first
dependent, and R154 for each dependent thereafter.
The main difference between the capped
medical deductions and the new tax credits is that tax deductions were deducted
from the financial advisor’s earnings whereas the new tax credits are added to
the actual tax payable.
Contributions by employees older than 65
years will remain fully deductable and they will not be impacted by the changes.
The
illustrative table below is an example of the monthly cash effect of the
medical credit on financial advisors under 65, making medical contributions for
a family of four, and with no other medical expenses:
Annual
Taxable
Income |
0
- R160,000
|
R160,001
-R250,000 |
R250,001
- R346,000 |
R346,001
- R484,000 |
R484,001
- R617,000 |
R617,001
and above |
Tax
Rate
|
18%
|
25%
|
30%
|
35%
|
38%
|
40%
|
Cash
effect on
employees per month |
Additional
R350.40 |
Additional
R188 |
Additional
R72 |
Less
- R44.00 |
Less
- R113.60 |
Less
- R160 |
