ional beneficiary will increase from R172 to R181 a month – an increase of 5.23%, as iol.co.za states.
But do you know how the medical tax credit changes will influence your company's payroll?
Keep reading to find out!
Here's what's on the card for SA's medical credit industry
Note that these increases are not in line with increases in medical scheme contributions, as the same source explains. Also, this happens in the context of which inflation for the year to January was 4.4%, as measured by the consumer price index. According to the latest Bankserv Disposable Salary Index for January, disposable salaries (the amount deposited in your bank account) increased on average by 5.6% in 2014.
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By the end of 2014, medical schemes announced contribution increases of between 5.3% and 10%.
The Budget Review proposes that credits for medical scheme contributions must be taken into account when pay-as-you-earn (PAYE) tax is deducted.
At the present time, two drafts of the regulations have been published and the Budget Review notes that Treasury and the Department of Health aim to publish final regulations by June.
Finance Minister Nhlanhla Nene said that it is too early to say whether the government would raise value-added tax (VAT) to fund NHI. According to the previous source, Judge Dennis Davis, the chairman of the Tax Review Committee, said this week that VAT will definitely be increased to fund NHI.
Now that you understand what the changes are and why they're happening, let's look at how the medical tax credit changes affect your business!
What these medical tax credit changes do to your payroll
If your company contributes to medical aid schemes on behalf of your employees, you must make sure you treat the contributions correctly. If you make mistakes, expect penalties!
Your contributions to staff medical aids are still taxable fringe benefits. However, your employees don't get a tax deduction for the contribution anymore, when they submit their tax returns. They now get a tax credit.
Note that SARS introduced the additional medical tax credit to replace the previous deduction for medical expenses, which has become effective from 1 March 2014 (i.e. for the 2015 tax year and beyond).
This tax credit also lets you deduct any excessive medical aid contributions
Keep in mind that previously you'd let your employees deduct their medical aid contributions, based on the SARS allowable amounts, your employees now get a tax credit.
And, instead of using the SARS amounts as a deduction, and reducing the employee's remuneration where you calculate their PAYE, you now use the medical tax credit to reduce the PAYE itself.
The new monthly tax credit amounts for the 2015 tax year are:
• R257 each for the main member (your employee) and one dependent;
• R172 for each additional dependent.
Use this information to keep the system working correctly and pay the fair contributions!