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Section 18 deduction for maintenance paid by taxpayer towards her disabled child

24 October 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: My client enquired whether we can claim as a deduction the maintenance she paid towards her adult child who is bipolar, i.e she stays in her flat and she pays all the levies, rates and taxes and pay her a monthly amount. Her child is receiving a disability grant and is not working.

My viewpoint is that all medical expenses paid on her behalf will be deductible as a medical expenses (the taxpayer is over the age of 65 years). However, the amount paid for her upkeep will not be deductible.

What kind of proof does SARS require in order to claim medical expenses paid on behalf of one’s daughter? My client has no medical aid.

A: In terms of the income Tax Act ‘qualifying medical expenses’ means any expenditure that is prescribed by the Commissioner (other than expenditure recoverable by a person or his or her spouse) necessarily incurred and paid by the person during the year of assessment in consequence of any physical impairment or disability suffered by the person or any dependant of the person.  

The emphasis is on expenses ‘prescribed by’ SARS.  In Annexure B – The prescribed list of expenditure SARS states as follows (under nature of expense: personal attendant care expenses):

Examples:

Actual living-in expenses: Electricity, food and water incurred and paid by the taxpayer for the care attendant. SARS would generally allow the living-in expenses incurred and paid by the taxpayer, if the aggregate amount of such expenses does not exceed 10% of the annual salary payable to a care attendant up to a limit of 50% of the annual domestic worker minimum wage under Area A of the Sectoral Determination 7 for Domestic Workers (currently R18 076.08).

Exclusions:

  • The spouse, parent or child is excluded as a care attendant. For example, if the wife is a person with a disability and the husband looks after her, the amount paid to the husband by the wife will not qualify for a deduction.
  • Any living-in expenses for a person with a disability and any other living-in expenses other than food, electricity and water for a care attendant. For example, the taxpayer cannot claim for the space (for example room) used by the person with a disability in the house.  .

The following documentation must be retained for audit purposes when a medical allowance is claimed for a year of assessment:

A completed list of amounts not submitted to or recoverable from the taxpayer’s medical scheme, together with proof of such amounts incurred and paid. 

A duly completed and signed Confirmation of Disability (ITR-DD) form.  

The aforementioned documentation as well as receipts must not be submitted with the annual income tax return, but must be stored and made available on SARS’ request, in the event that the taxpayer is required to substantiate the medical claims. The taxpayer is required to keep records such as receipts, paid cheques, bank statements, deposit slips and invoices for five years from the date on which the return for the relevant year of assessment was received by SARS. 

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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