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Medical rebate for non-residents

Monday, 17 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: I have a client that received a pension in RSA but is now a permanent resident in Australia.  Will her medical expenses in Australia be allowed as a deduction when she submits her tax?  She does not submit a tax return in Australia.

A: We accept that when you say the client is ‘a permanent resident in Australia’ that you mean the person is not a resident of the RSA as defined in section 1 of the Income Tax Act.  

Article 18 of the RSA / Australia treaty provides as follows:

"Subject to the provisions of paragraphs 2 and 4 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.”  Article 19 deals with pensions in respect of services rendered to the State or subdivision or authority.  

The RSA therefore has a right to tax the portion of the pension.  Section 9(2)(i) provides that "an amount is received by or accrues to a person from a source within the Republic if that amount constitutes a pension or an annuity and the services in respect of which that amount is so received or accrues were rendered within the Republic: Provided that if the amount is received or accrues in respect of services which were rendered partly within and partly outside the Republic, only so much of that amount as bears to the total of that amount the same ratio as the period during which the services were rendered in the Republic bears to the total period during which the services were rendered must be regarded as having been received by or accrued to the person from a source within the Republic…”  

In terms of the definition of gross income RSA sourced receipts (or accruals) of a non-resident will be included in gross income.  The qualifying medical expenses (as defined) will then qualify for a deduction (for the 2014 year of assessment in terms of section 18) or a rebate (for the 2015 year of assessment in terms of section 6B).  

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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