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Will a medical insurance fund qualify for a medical scheme rebate in respect of section 6A and 6B?

23 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: A client of mine contributes to a medical insurance fund for himself and his wife. His monthly premium is R1 927.00 and it allows him access to medical practitioners, dentist, scripted medication, pathology and radiology services, and specialist (all within specified limits).

I claimed for the tax credit on medical funds, because in my opinion there is little difference between the medical insurance fund and a medical scheme. Could you please clarify if I am correct?

A: National Treasury has stated the principal differences as follows:

A health insurance policy is a binding contract issued by an insurance company to an individual. The policy can be sold by an insurance company in terms of the Long Term Insurance Act or Short Term Insurance Act and is subject to regulatory oversight by the Financial Services Board ("FSB”). The policy promises to pay for certain stated benefits when the individual is ill or injured. The individual pays a certain premium which is directly related to the age, health status or income of the individual. Specific type of exclusions may also be built into a policy, which can have the effect of limiting who the policy can be sold to. 

Medical schemes are regulated in terms of the Medical Schemes Act and are subject to regulatory oversight by the Council of Medical Schemes ("CMS”). They are non-profit organisations and belong to their members. Medical schemes operate through the collective pooling of good and bad risks, and may not discriminate between individuals based on age or health status. Contributions apply universally to all members who are enrolled and may only vary in respect of the cover provided. Different benefits options are priced differently depending on the level of cover afforded and are determined by the rules of the scheme. The effect is that there are equal premium contributions for high and low risk members, which promotes greater equity in the scheme.

Only contributions to a medical scheme will qualify for the medical scheme rebate in terms of section 6A and 6B of the Income Tax Act.

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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