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Update: Article updated for the 2018, 2019 and 2020 tax year.

The focus in the explanation below is on a person without tax knowledge that would simply like to understand what they are allowed to deduct for their tax.

All the amounts used below are for the 2018 tax year, i.e. 01/03/2017 – 28/02/2018.

The first allowable deduction is for any contributions you make to a registered medical aid. The deduction system consists of a tax credit that you receive to deduct from the amount of tax you have payable for the relevant tax year.  If, for example, you had to pay R5 000 tax for the year you will now receive a tax credit, say R1 000, which you can deduct from the R5 000. Therefore the tax payable is now only R4 000.

Not important to remember (but you will sound smart with your colleagues and friends), this deduction is called the Section 6A medical scheme fees tax credit.

2018 Tax year (01/03/2017 - 28/02/2018)

Let us examine how the Section 6A medical scheme fees tax credit for the 2018 tax year (2019 below) is determined.

Assuming the taxpayer is below the age of 65 and there is no member on the taxpayer’s medical aid with a permanent disability (in the case of the taxpayer being older than 65 and or disability involved the amounts and rates will differ):

For each month of the tax year that the taxpayer (main member) have belonged to a medical aid you get a tax credit of R303.00. If a taxpayer has any dependents on the medical aid, such as the taxpayer’s partner or children the taxpayer will receive more tax credits. For the first dependent the taxpayer will receive an extra R303.00, for any additional dependents the taxpayer receives an additional R204.00 for each dependent.

Section 6A deduction:

Let us have a look at John’s family.

Thus if it is a family of John, John’s Wife and three children where John is the main member of the medical aid, the total monthly tax credit will be:

John (main member) R303.00
John’s Wife (first dependant) R303.00
Child One (additional dependent) R204.00
Child Two (additional dependent) R204.00
Child Three (additional dependent) R204.00
Total tax credit per month R1 218.00
Total tax credit for the year R14 616.00

However, this is not the only possible tax credit.

There is also a tax credit for additional medical expenses. Now, if you want to sound smart you can tell your friends about the Section 6B additional medical expenses tax credit:

This one is a bit trickier. You will apply the following formula:

Your total contributions to a medical aid for the relevant tax year

Less:

4 x [the tax credit that you received under section 6A (the one we looked at above)]

Plus:

All the qualifying medical expenses that were not paid by the medical aid in the relevant tax year (out of pocket expenses).

Less:

7.5% of your taxable income (with some other minor technicalities which I will not mention here).

Equals:

The excess amount

Multiplied by 25%, equals:

The section 6B medical aid tax credit

Usually, a good indicator as to whether you will qualify for the additional credit is the rule of thumb to take your annual salary x 7.5% and determine whether you made additional medical expenditure above that amount.

Let us continue with the example of the family of John. We will work with the following assumptions:

Section 6B deduction:

R60 000 (total medical aid contributions)

Less:

4 x R14 616.00 (section 6A tax credit)

= R1 536

Plus:

R35 000 (medical expenses John covered from his pocket)

= R36 536

Less:

R22 500 (R300 000 x 7.5%) (7.5% of John’s taxable income)

= R14 036 (excess amount)

Multiplied by 25%, equals:

R3 509 (section 6B medical aid tax credit)

Thus John’s total medical aid tax credit for the year will be:

R14 616 (Section 6A) + R3 509 (Section 6B)

= R18 125.00

It is important to note that you can only deduct this tax credit against tax payable. In other words, if you have no tax payable (before this deduction) you will not get the R18 125 as a refund. Also if you have R10 000 tax payable (before this deduction), you will not get R8 125.00 as a refund.

2019 Tax year (01/03/2018 - 28/02/2019)

Let us examine how the Section 6A medical scheme fees tax credit for the 2019 tax year (2018 above) is determined.

Assuming the taxpayer is below the age of 65 and there is no member on the taxpayer’s medical aid with a permanent disability (in the case of the taxpayer being older than 65 and or disability involved the amounts and rates will differ):

For each month of the tax year that the taxpayer (main member) have belonged to a medical aid you get a tax credit of R310.00. If a taxpayer has any dependents on the medical aid, such as the taxpayer’s partner or children the taxpayer will receive more tax credits. For the first dependent the taxpayer will receive an extra R310.00, for any additional dependents the taxpayer receives an additional R209.00 for each dependent.

Section 6A deduction:

Let us have a look at John’s family.

Thus if it is a family of John, John’s Wife and three children where John is the main member of the medical aid, the total monthly tax credit will be:

John (main member) R310.00
John’s Wife (first dependant) R310.00
Child One (additional dependent) R209.00
Child Two (additional dependent) R209.00
Child Three (additional dependent) R209.00
Total tax credit per month R1 247.00
Total tax credit for the year R14 964

However, this is not the only possible tax credit.

There is also a tax credit for additional medical expenses. Now, if you want to sound smart you can tell your friends about the Section 6B additional medical expenses tax credit:

This one is a bit trickier. You will apply the following formula:

Your total contributions to a medical aid for the relevant tax year

Less:

4 x [the tax credit that you received under section 6A (the one we looked at above)]

Plus:

All the qualifying medical expenses that were not paid by the medical aid in the relevant tax year (out of pocket expenses).

Less:

7.5% of your taxable income (with some other minor technicalities which I will not mention here).

Equals:

The excess amount

Multiplied by 25%, equals:

The section 6B medical aid tax credit

Usually, a good indicator as to whether you will qualify for the additional credit is the rule of thumb to take your annual salary x 7.5% and determine whether you made additional medical expenditure above that amount.

Let us continue with the example of the family of John. We will work with the following assumptions:

Section 6B deduction:

R60 000 (total medical aid contributions)

Less:

4 x R14 964.00 (section 6A tax credit)

= R144

Plus:

R35 000 (medical expenses John covered from his pocket)

= R35 144

Less:

R22 500 (R300 000 x 7.5%) (7.5% of John’s taxable income)

= R12 644 (excess amount)

Multiplied by 25%, equals:

R3 161 (section 6B medical aid tax credit)

Thus John’s total medical aid tax credit for the year will be:

R14 964 (Section 6A) + R3 161 (Section 6B)

= R18 125.00

It is important to note that you can only deduct this tax credit against tax payable. In other words, if you have no tax payable (before this deduction) you will not get the R18 125 as a refund. Also if you have R10 000 tax payable (before this deduction), you will not get R8 125.00 as a refund.

2020 Tax year (01/03/2019 - 28/02/2020)

Let us examine how the Section 6A medical scheme fees tax credit for the 2020 tax year (2019 above) is determined.

Assuming the taxpayer is below the age of 65 and there is no member on the taxpayer’s medical aid with a permanent disability (in the case of the taxpayer being older than 65 and or disability involved the amounts and rates will differ):

For each month of the tax year that the taxpayer (main member) have belonged to a medical aid you get a tax credit of R310.00. If a taxpayer has any dependents on the medical aid, such as the taxpayer’s partner or children the taxpayer will receive more tax credits. For the first dependent the taxpayer will receive an extra R310.00, for any additional dependents the taxpayer receives an additional R209.00 for each dependent.

Section 6A deduction:

Let us have a look at John’s family.

Thus if it is a family of John, John’s Wife and three children where John is the main member of the medical aid, the total monthly tax credit will be:

John (main member) R310.00
John’s Wife (first dependant) R310.00
Child One (additional dependent) R209.00
Child Two (additional dependent) R209.00
Child Three (additional dependent) R209.00
Total tax credit per month R1 247.00
Total tax credit for the year R14 964

However, this is not the only possible tax credit.

There is also a tax credit for additional medical expenses. Now, if you want to sound smart you can tell your friends about the Section 6B additional medical expenses tax credit:

This one is a bit trickier. You will apply the following formula:

Your total contributions to a medical aid for the relevant tax year

Less:

4 x [the tax credit that you received under section 6A (the one we looked at above)]

Plus:

All the qualifying medical expenses that were not paid by the medical aid in the relevant tax year (out of pocket expenses).

Less:

7.5% of your taxable income (with some other minor technicalities which I will not mention here).

Equals:

The excess amount

Multiplied by 25%, equals:

The section 6B medical aid tax credit

Usually, a good indicator as to whether you will qualify for the additional credit is the rule of thumb to take your annual salary x 7.5% and determine whether you made additional medical expenditure above that amount.

Let us continue with the example of the family of John. We will work with the following assumptions:

Section 6B deduction:

R60 000 (total medical aid contributions)

Less:

4 x R14 964.00 (section 6A tax credit)

= R144

Plus:

R35 000 (medical expenses John covered from his pocket)

= R35 144

Less:

R22 500 (R300 000 x 7.5%) (7.5% of John’s taxable income)

= R12 644 (excess amount)

Multiplied by 25%, equals:

R3 161 (section 6B medical aid tax credit)

Thus John’s total medical aid tax credit for the year will be:

R14 964 (Section 6A) + R3 161 (Section 6B)

= R18 125.00

It is important to note that you can only deduct this tax credit against tax payable. In other words, if you have no tax payable (before this deduction) you will not get the R18 125 as a refund. Also if you have R10 000 tax payable (before this deduction), you will not get R8 125.00 as a refund.

Lastly, you can get all the relevant medical aid contributions, the number of members, etc. on your tax certificate that your medical aid provides to you on an annual basis. You have to keep this certificate for if SARS asks you to provide it as evidence for your deduction.

Author: Chris Herbst

Get our iOS app to help you with monthly and annual payroll tax calculations (including medical aid section 6A): https://itunes.apple.com/za/app/taxtree/id1263890353?mt=8

Would you like us to complete your tax return: Contact:https://www.chconsulting.co.za/contact