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The taxability of proceeds from a Health Care Protector plan

Wednesday, 03 December 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: My client had a Health Care Protector plan from Discovery. On my client's 65th birthday he received a payment from this plan of R1xx 000. The amount is normally reduced by any claims from the medical scheme, but my client had limited claims and therefore received an amount of R1xx 000. The broker that sold the plan is of the opinion that it is a policy, therefore the proceeds are exempt from tax. 

I am not familiar with this type of insurance product and have not encountered it yet. My first thought was that it is probably exempt from tax, but I am not sure on which part of the act I should base my opinion.

A: Discovery offers a range of products including medical aid, life insurance, credit cards and investments.  Based on the information provided it is impossible for us to comment or provide the guidance required.  It is suggested that you obtain more detail from the broker or Discovery and then re-submit a request based on that.  There are a number of possibilities:

Section 10(1)(gI) currently exempts from normal tax certain polies, but is unlikely to apply in this instance.  Paragraph 55 of the Eighth Schedule then disregards the gain on certain long term assurance pay-outs.  Amounts received from a benefit fund may also be exempt.  

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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