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What Can You Claim In Our Tax Regime?

12 November 2008   (0 Comments)
Posted by: Author: Bernard Sacks
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What Can You Claim In Our Tax Regime?

Such is our tax regime that in most instances individual taxpayers are precluded from claiming any private or domestic expenditure.A notable departure from this is in relation to medical expenses.

For taxpayers under 65 years old and their dependants – if they are not handicapped – the situation is as follows:

-Contributions to a medical aid fund up to a cap of R530 per month for the taxpayer and the first  dependant, and R320 per month for additional dependants are deductible.This is naturally reduced by any amount paid by the taxpayer’s employer and which was not taxed.

-The total of all medical aid fund contributions in excess of the limits above and all other medical expenses including necessary expenditure in respect of a physical disability, less 7.5% of taxable income before the medical allowance.

Example:

If you have taxable income of R100 000 per year, 7.5% is R7 500. If your medical expenses come to R9 000 per year your allowable deduction would be R1 500 (R9 000 – R7 500 = R1 500).

The exceptions to this rule are persons over 65 and handicapped individuals, neither of whom have to suffer the 7.5% threshold, and enjoy a deduction of their medical expenses from the first Rand. Apart from the more obvious categories such as blindness, deafness, and permanent disability which requires the use of a wheelchair, caliper, crutch or artificial limb, a handicapped person includes someone who suffers from a mental illness as defined in section 1 of the Mental Health Care Act.

The definition of mental illness is fairly wide and, for example, covers depression. So if a taxpayer or dependant suffers from depression, the 7.5% threshold would not apply and all his or her medical expenses would be deductible.What isn’t clear from the legislation is whether the mental illness must be of a permanent nature. In the legislation, the word ‘permanent’ is used in relation to disability, not in relation to mental illness.What happens if it’s a transitory problem? Section 1 of the Mental Health Care Act defines mental illness as a positive diagnosis of a mental health related illness in terms of accepted diagnostic criteria, made by a health care practitioner authorised to make such a diagnosis.It doesn’t mention whether this is permanent or temporary.

The recently released Draft Revenue Laws Amendment Bill contains some interesting changes to the status quo.For example, the definition of disability seems to have been widened to a moderate or severe limitation of a person’s ability to perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment.The limitation must have lasted a year, or have a prognosis of lasting at least a year.This could open the door for certain conditions, such as depression, providing it lasts a year or is likely to last a year, to be considered a disability and therefore entitles the person suffering from it to be exempt from the 7.5% threshold.Other proposed amendments are designed to limit the types of medical expenditure allowance and impose further limitations.But for now, the status quo remains as the new bill will take several months to pass through the system and become law.

Source: By Bernard Sacks (TaxTALK) 



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