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Do you have ageing employees? Here's how you and SARS can help them reduce their medical expenses

by , 09 December 2014
As your employees get older, they'll need more and more medical care. If you help them with medical aid contributions and expenses, this is something that may affect you.

But there's a way you, with help from SARS, can help reduce your ageing employees' medical expenses. This means you don't have to worry about possible increases to their medical aid rates and you can help keep your employees healthy by helping them get the medical care they need.

Today I'm going to show you how to do this...

 

This is the only way to treat the medical expenses if your employees are over 65

 
Now, you have to treat their medical aid contributions the same as everyone else when it comes to PAYE. They'll only qualify for the SARS medical tax credit. 
 
But, if your employee is 65 or older he can still reduce his medical expenses. He can do this by putting a 'no value' on any medical expenses you paid for. This means, this part stays the same when you calculate PAYE.
 
Sound confusing? Don't worry, here's an example to help explain it.
 
*********** Reader's choice  ***************
 
If you don't implement the 2014 medical tax credit changes correctly you'll face:
 
Interest charges
A 200% penalty
A criminal conviction
                                                                 
 
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Craig's story will explain how to help your ageing employee reduce his medical expenses

 
Craig is 72 years old. His boss pays his full medical aid contribution of R1 500 per month. His boss also helps him pay his extra medical expenses. These costs come to R1 800 for the month. Now Craig earns R15 000 per month and his wife and son are also on his medical aid. What is the remuneration Craig's boss must calculate his PAYE on each month?
 
Basic income: R15 000
Add: Medical aid contribution of R1 500
Add: Medical expense fringe benefit of R0
Total remuneration for the month = R15 000 
 
Craig's boss calculates his monthly PAYE as R1 080 (rounded for this example). This is minus Craig's medical tax credit of R686 (R257 for first two beneficiaries + R172 for the third). His boss withholds R394 (R1 080 – R686) in PAYE and pays it to SARS.
 
Why was the medical expense fringe benefit R0? Because it meets the requirement to be 'no value', so it's R0. If Craig was younger than 65, it couldn't be 'no value'. Then his total remuneration would be R15 000 + R1 500 + R1 800 = R17 800.
 
What this means is if you pay medical aid contributions for you employee, you must still include it in his PAYE. But if you pay for any additional medical expenses (outside of medical aid contributions) SARS let's you and your employee ignore them in terms of tax.
 
This will reduce your employees overall medical expenses.
 
To find out more about how to handle the tax on medical expenses correctly, check out the Practical Tax Loose Leaf Service
 

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