How do we declare medical aid for the bi-annual submissions?
Question
Up until now, we’ve submitted our tax returns and SARS forms manually. Not I’m faced with the first ever bi-annual submission. Should I use the same manual forms to make this submission?
I also need help with these two issues:
1. Our employee has a medical aid membership of R1 500. The company pays 50% of this each month, while the employee pays the rest. What portion of our monthly payment towards the membership is deemed to be a taxable fringe benefit ? What portion of the employee’s portion is deemed to be deductable before tax?
2. Please explain to me which codes I use on the IRP5 for the medical aid –for the company's portion and the member employee’s portion?
Answer
I suggest that you look into e@syFiling as a viable way to submit your IRP5 and your reconciliation. You can still make submissions manually, but the checks that have been built into the e@syFile programme to pick up errors are quite useful in ensuring that your returns are correct.
On calculation of the fringe taxable fringe benefit the capped amount must also be taken into account. In your query to our Helpdesk, you’ve only taken the company’s and members contribution into account.
For the purposes of explanation I presume that the employee is the only person on the medical aid fund. So let’s take a look at this in detail:
Employer contribution R750
Employee Contribution R750
Capped amount R670
As per the tax rules, the full amount paid by the employer is shown against code 3810, in this case R750.
The medical aid contribution limited to the capped amount can be deducted to arrive at the taxable portion, in this case R670.
You must use code 4005 for any contribution made by the employer for the benefit of the employee, but deemed to be paid by the employee.
In this case the employee’s portion of R750 plus the employer’s portion R750 = R1500. This will be shown against code 4005 on the IRP 5.
