What is a medical aid tax credit?
Medical aid tax credit is a rebate from SARS that results in a reduction of calculated tax for main members of medical aid. If you are the main member of a medical aid scheme you will receive this credit, which accrues on a monthly basis based on the number of dependents you have (adults and children).
SARS updates the tax credit amount on a yearly basis, and there are different amounts for the main member and first adult member, and then child members and further adult members.
Many taxpayers are excited to receive a refund when submitting their annual tax returns, however the refund could be as a result of the tax credits not being claimed throughout the year.
You have the option to include these tax credit in your monthly payslip. The tax credits reduce your monthly PAYE amount depending on how many additional members there are on your medical aid.
Why is it important to keep your accountant up to date with medical aid changes?
It is important to let us know when any information changes i.e number of dependents, monthly contributions etc. so that we can adjust the payroll accordingly.
By not including the correct information on your payslip, you are either receiving too much or not enough tax credits from SARS. If your accountant is not notified timeously, adjustments will need to take place to update your payslip YTD total and bring it inline with the correct information.
Any differences between the Medical aid tax credits on your IRP5 versus your medical aid certificate will create problems when your tax return is submitted.
Keep your accountant informed about any changes that take place with regards to your medical aid fund ie contributions (especially when the company pays for the medical on your behalf), number of members, change in member classification (child to adult) etc. to avoid any queries that might arise.
We as The Accounting Company are here to assist you and help make your life easier.