How do I remove ‘gap cover’ insurance fees from the medical contribution amounts on an IRP5?
16 July 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: One of our
clients provided us with her IRP5 and medical aid certificate for us to submit
her Income Tax return. I noticed that the medical deductions per the IRP5 is
higher than the medical aid contributions per the medical aid certificate.
I enquired what caused the difference and heard that the GAP
Cover contributions were also deducted as part of the medical aid
contributions. I know that GAP cover is insurance and not medical expenditure,
so the GAP cover contributions may not be deducted.
How do I rectify this?
If I leave it as it is, our client will get a greater
deduction than what is allowed. I am not able to deduct the difference on the
return and only positive amounts are allowed.
A: We are not
sure what the "medical deductions per the IRP5” are that you refer to. For the 2015 year of assessment the employer
cannot make a deduction of contributions to a medical scheme from the net
remuneration of the employee – see paragraph 2(4) of the Fourth Schedule to the
Income Tax Act. Paragraph 9(6) allows
that there must be deducted from the amount to be withheld or deducted by way
of employees’ tax the amount of the medical scheme fees tax credit that applies
in respect of that employee (in terms of section 6A) if—
(a) the employer effects payment of the medical scheme fees
as contemplated in section 6A(2)(a); or
(b) the employer does not effect payment of the medical
scheme fees as contemplated in section 6A(2)(a), at the option of the employer,
if proof of payment of those fees has been furnished to the employer.
The tax credit applies in respect of fees paid by the
taxpayer to a registered medical scheme. The number of persons (dependants) for
whom you make contributions to a medical scheme will determine the value of the
credit. The amount of the medical scheme contribution tax credit is:
R257 in respect of benefits to the taxpayer;
R257 in respect of benefits the taxpayer’s first
R172 in respect of benefits to each additional
These amounts will in all probability not agree to the
contributions made to the fund, but you are correct that the employer, against
code 4005 (3810 and 4474), must only include the actual fees paid by the
employer. If the GAP Cover contributions
are not fees it should have been excluded from the amount on the IRP5. The medical
scheme fees tax
credit will be
reflected next to
source code 4116 only if the medical contributions were paid by the employer.
Your concern is correct that the amounts reflected on the
IRP5 (the wrong ones) may well be used for the additional medical expenses tax
credit and SARS may will only pick this up if a review is called for. It may therefore be appropriate to request
the employer to correct the IRP5 as the employee has no opportunity to correct
this on the IT12.
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not accept any responsibility for consequences of decisions taken based on this
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