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How should a bonus paid into a medical aid saving account be disclosed in a tax return?

Tuesday, 10 March 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: A few years ago a bonus was paid into a medical aid savings account on the instruction from a broker that this was a valid tax saving mechanism. The employee has now resigned from the company and left the medical aid and hence been paid the amount in the savings account which has also grown. He has queried how this should be shown on his tax return. Should the original amount be shown as income and the growth as a capital gain? I was not aware of this tax saving/delaying mechanism and do not know what to advise.

A: Typically any credit balances on a medical aid savings account would earn interest which is subject to normal income tax in terms of section 24J of the Income Tax Act. The interest earned should have reflected on the taxpayer’s annual medical aid tax certificate and interests earned should have been included in his tax return annually. The information provided is unfortunately not sufficient and this advice is provided face value.

I do suggest that a tax certificate be issued by the medical aid to determine whether there might be any other factors involved.

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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