Print Page   |   Report Abuse
News & Press: Institute News

FAQ - 16 March 2016

16 March 2016   (0 Comments)
Posted by: Author: SAIT Technical
Share |

Author: SAIT Technical

1.  Can a professional photographer claim cosmetic expenses as a business expense?

Q: Can a professional photographer claim expenses such as dentistry, chiropractor and general cosmetic expenses as a business expense?  My client is a well-known fashion photographer for magazines and he wants his company to pay cosmetic expenses such as hair-cuts, clothes and medical expenses such as chiropractors. His reasoning is that as he is a vital part of the fashion industry, it is of the utmost importance that his appearance should be above par even though he is behind the cameras and not in front of it.

A. Judge Conradie, in the Warner Brothers case, said that "deductible expenditure has certain characteristics: it must be incurred in the production of income (s 11(a)) and will not be allowed as a deduction against gross income if it is not laid out or expended for the purposes of trade.” 

It is only where this is not "qualifying medical expenses” when it may qualify to be deducted under section 11(a).  The issue is whether or not it is qualifying medical expenses as defined in section 6B.  We accept that, if he was a member of a medical scheme it may not have been covered.  This is because cosmetic surgery is elective and for that reason not usually covered by medical schemes.  It may also not qualify as a "relevant health service” in terms of the definition in the Medical Schemes Act, 1998.  The Income Tax Act, however, doesn’t refer to this.  

The section 6B(1)(a)(i) requirement is that it must be "amounts … paid by the person … to any duly registered medical practitioner, dentist, optometrist, homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopedist for professional services rendered or medicines supplied to the taxpayer…”  The subsection doesn’t, as with nursing or a nurse (in item (ii)), refer to illness or confinement.  The item (i) expenses are also not further qualified as is for instance expenses in consequence of any physical impairment or disability suffered by the taxpayer – there the expenses must be prescribed by SARS.  

The only requirements then seem to be that it is paid to a duly registered person (mentioned in the section) and that it must be for professional services rendered.  We submit that duly registered refers to registered with the Health Professions Council of South Africa – see SARS’s guide on the determination of medical tax credits and allowances.    

No guidance is given on the meaning of professional services rendered and the phrase must take its ordinary meaning.  The Health Professions Act, 1974, refers to a person practicing "any health profession the practice of which mainly consists of -

(i) the physical or mental examination of persons;

(ii) the diagnosis, treatment or prevention of physical or mental defects, illnesses or deficiencies in man humankind; 

(iii) the giving of advice in regard to such defects, illnesses or deficiencies; or 

(iv) the prescribing or providing of medicine in connection with such defects, illnesses or deficiencies…” 

As the taxpayer would bear the onus of proof if the claim is disputed (it could well be that SARS’s view may be that it is not qualifying medical expenses) it is suggested that you provide the client with a tax opinion or obtain one from SARS.  

If the deduction is to be made in terms of section 11(a) one will have to consider section 23(a) and section 23(g).  In other words, a private use adjustment would be required.  

2. Is the Income Protection portion of a Group Risk contribution considered a non-taxable benefit?

Q. On 1 March 2015 the tax laws changed whereby income protection policies (IPP) became tax free. 1 March 2016 the Retirement Funds Amendments Act came into effect. For Group Risk Schemes, does the entire risk contribution become tax free, as this includes the Income Protection Policy or does one exclude the Income Protection Policy portion from the contributions?

A. The exemptions that you refer to are found in section 10(1) and they read as follows:

(gH) any amount received or accrued in respect of a policy of insurance where—

(i) the policy relates to death, disablement or severe illness of an employee or director, or former employee or director, of the person that is the policyholder; and 

(ii) no amount of premiums payable in respect of that policy on or after 1 March 2012 is deductible from the income of that person for the purposes of determining the taxable income derived by the person from carrying on any trade;

(gI) any amount received or accrued in respect of a policy of insurance relating to the death, disablement, illness or unemployment of any person who is insured in terms of that policy of insurance, including the policyholder or an employee of the policyholder in respect of that policy of insurance to the extent to which the benefits in terms of that policy are paid as a result of death, disablement, illness or unemployment other than any policy of which the benefits are paid or payable by a retirement fund;

A taxable benefit arises where 

(k) the employer has made any payment to any insurer under an insurance policy directly or indirectly for the benefit of the employee or his or her spouse, child, dependant or nominee: Provided that this paragraph shall not apply in respect of an insurance policy that relates to an event arising solely out of and in the course of employment of the employee; or

(l) the employer has made any contribution for the benefit of any employee to any pension fund, provident fund or retirement annuity fund.

In order for the employee to make a deduction the amount contributed by an employer of the person for the benefit of the person to any pension fund, provident fund or retirement annuity fund in terms of the rules of that fund by a person that is a member of that fund must, to the extent that the amount has been included in the income of the person as a taxable benefit in terms of the Seventh Schedule, be deemed to have been contributed by the person.  

We are not sure that the contributions to the income protection fund, whilst a taxable benefit, meet the requirement for deduction.  

Disclaimer: Nothing in these queries and answers 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 answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.  



WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

MINIMUM REQUIREMENTS TO REGISTER

The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

Membership Management Software Powered by YourMembership  ::  Legal