With the increasing cost of living, taxpayers often find themselves in the unenviable position of having to fund the medical expenses of family members such as a parent, grandparent, sibling, uncle, aunt or cousin. Sometimes these family members may belong to their own medical scheme but cannot afford the contributions, or they may not even belong to a medical scheme and require assistance with their medical bills.
The two medical tax rebates that taxpayers can potentially qualify for are the medical scheme fees tax credit (section 6A) and the additional medical expenses tax credit (section 6B).
Central to both sections is the definition of 'dependant' in section 6B(1), which reads as follows:
' “dependant" means—
(a) a person's spouse;
(b) a person's child and the child of his or her spouse;
(c) any other member of a person's family in respect of whom he or she is liable for family care and support; or
(d) any other person who is recognised as a dependant of that person in terms of the rules of a medical scheme or fund contemplated in section 6A(2)(a)(i) or (ii),
at the time the fees contemplated in section 6A(2)(a) were paid, the amounts contemplated in paragraph (a) and (b) of the definition of “qualifying medical expenses" were paid or the expenditure contemplated in paragraph (c) of that definition was incurred and paid;'
Besides a taxpayer's spouse and child, other family members are potentially catered for in paragraphs (c) and (d) of the above definition. SARS notes that 'the phrase 'any other member of a person's family' includes relations by blood, adoption and marriage. LAWSA[1] notes that parents and their children have a reciprocal duty of support, while grandparents have a right to support from grandchildren but only if their own children are dead or unable to support them. A brother or sister can claim support from their siblings but only if their parents are unable to provide support. The duty of support generally does not extend as far as cousins, step-parents and step-children [2]and between in-laws (for example, a parent-in -law and brother or sister-in -law. But the courts have cast the net wider in some circumstances. For example, in one case the court awarded damages to an aunt whose nephew had been killed in a car accident as their relationship was like that of mother and son.[3]
As for paragraph (d), the person must be a dependant as defined in the rules of
- a medical scheme registered under the Medical Schemes Act; or
- a fund which is registered under any similar provision contained in the laws of any other country where the medical scheme is registered.
Products provided by short- or long-term insurers such as gap cover and medical insurance do not qualify for the tax credits, since they are not a medical scheme registered under the Medical Schemes Act. SARS notes that certain bargaining councils established under s 27 of the Labour Relations Act 66 of 1995 would also not qualify unless they were registered under the Medical Schemes Act.[4]
Exactly who can qualify as a dependant for purposes of a medical scheme would depend on the rules of the particular scheme.[5]
The final outdented paragraph of the definition contains a timing rule which requires that the person referred to in paragraphs (a) to (d) qualify as a dependent at the time the medical scheme contributions or other qualifying medical expenses for that person were paid or in the case of prescribed physical or disability expenditure, were incurred and paid.
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Example |
Result |
| Jack and Jill married on 31 July 2023. Jack had incurred medical expenses of R8 000 for Jill on 30 June 2023 but paid them only on 31 August 2023. | Jack will be able to claim the expenses as Jill was a spouse at the time the expenses were paid. |
| John divorced Karen on 31 July 2023. He had incurred R10 000 of medical expenses for Karen before divorce but the expenses were paid on 5 August 2023. | John will be unable to claim the expenses as Karen was not a spouse at the time the expenses were paid. |
| Daniel is Jane's minor son from a prior marriage. Before she married Piet, Piet had paid Daniel's medical expenses. | Piet will be unable to claim the expenses as Daniel was not Piet's child or a child of his spouse at the time the expenses were paid. |
| Alfred added his mother-in-law, Olive, as a dependant to his medical fund on 31 October 2023. He had paid her medical expenses on 15 October 2023. | Alfred will be unable to claim the expenses as Olive was not a member of his medical scheme when the expenses were paid. |
Multiple persons paying medical scheme fees
Sometimes multiple persons share the cost of the medical scheme fees of a family member who is a dependant in relation to them. In this situation each contributor will be entitled to a share of the Medical scheme fees tax credit. They do not themselves have to be a member of a medical scheme but can contribute to the medical scheme of which the dependant is a member.
Example – Multiple persons contributing to the medical scheme fees of a family member
Facts:
Edward (80) is a member of the ABC Medical Scheme. His annual membership fees amount to R70 000. His two sons Ben and Ted each contribute R35 000 to the scheme as Edward can no longer afford the fees. Neither Ben nor Ted belong to a medical scheme.
Result:
For the 2024 year of assessment the medical fees tax credit for a single person is R364 × 12 = R4 368. Ben and Ted must share the credit as follows: R35 000/R70 000 × R4 368 = R2 184. Edward is not entitled to a medical scheme fees tax credit as he did not pay any fees.
What would have happened had Ben been a member of his own medical scheme? In such event, he would have a s 6A credit for his own membership of R364 plus half the credit for his dependant father (R364/2 = R182), giving him a total credit of R546 × 12 = R6 552.
A taxpayer can, depending on the rules of the particular medical scheme, include a family member as a dependant on their own medical scheme, and in such event the taxpayer will simply claim the credit in accordance with section 6A(2). For example, Hildegard (unmarried) has included her mother as a dependant on her medical scheme. For the 2024 year of assessment, she will be entitled to a section 6A credit of R728 per month (taxpayer plus one dependant).
The additional medical expenses tax credit
Any medical expenses paid on behalf of a dependant must fall within the definition of 'qualifying medical expenses' in section 6B(1). In summary, the definition encompasses
- fees paid to specified registered medical professionals including for medicines supplied by them;
- hospitals and nursing homes as well as registered nursing staff;
- prescription medicines;
- similar services and medicines incurred outside South Africa; and
- prescribed disability or physical impairment expenditure.
In order to qualify, the expenditure must
- not be recoverable (for example, from a medical scheme or insurer);
- have been paid during the year of assessment (not sufficient to merely have been incurred); and
- be for the person or his or her dependant.
Disabled persons
Physical impairment or disability expenditure necessarily incurred and paid by the taxpayer for a dependant must comply with the list of qualifying physical impairment or disability expenditure prescribed by SARS dated 1 March 2020, which applies to the 2021 and subsequent years of assessment.
The term 'disability' is defined in section 6B(1) as follows:
' “disability" means a moderate to severe limitation of any person's ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment, if the limitation—
(a) has lasted or has a prognosis of lasting more than a year; and
(b) is diagnosed by a duly registered medical practitioner in accordance with criteria prescribed by the Commissioner;'
The criteria prescribed by the Commissioner are set out in the ITR-DD form (Confirmation of diagnosis of disability), last updated 4 July 2023, which must be completed by the relevant specialist. The form needs to be completed every ten years when the disability is permanent or every year when it is temporary.
Thus, any taxpayers wishing to claim disability expenses under section 6B for a dependant will have to ensure that they have a completed ITR-DD form and that any disability expenditure appears on the prescribed list of qualifying physical impairment or disability expenditure.
Of course, it is one thing to have qualifying medical expenditure for a dependant who has a disability but quite another to translate that expenditure into a rebate. The conversion of expenditure into a rebate occurs under section 6B(3). Two categories of persons receive preferential treatment under that provision, namely,
- a person who is 65 years or older on the last day of the year of assessment; and
- a person who has a disability or when that person's spouse or child has a disability.
These persons are able to convert the qualifying expenditure to a rebate by multiplying it by 33,3%.
Any other person will receive far less favourable treatment. First, their qualifying expenditure that does not exceed 7,5% of taxable income is simply forfeited. Secondly, the balance of the expenditure is multiplied by a lower percentage of 25%. This category of persons would include a person under the age of 65 who is not disabled and whose spouse or child is not disabled. Thus, if you are not disabled, under 65 and are funding the medical expenses of a disabled dependant who is not your spouse or child, your tax credit under section 6B will be a lot lower. Thus, for example, John is 65 and has taxable income of R1 million and spends R100 000 on qualifying medical expenses for his disabled mother. John will be able to claim a s 6B tax credit of R100 000 × 0,333 = R33 300.
By contrast, Sally, aged 60, also has taxable income of R1 million and spends R100 000 on qualifying medical expenses for her disabled father. She will be entitled to a section 6B tax credit of only R6 250. In other words, 7,5% of R1 million = R75 000, which will not qualify, and the balance of R25 000 (R100 000 − R75 000) is multiplied by 0,25.
Conclusion
Taxpayers can potentially claim a tax credit under section 6A or section 6B for their qualifying dependants. But the quantum of the section 6B credit will greatly favour those who are 65 years or older, under 65 and disabled or under 65 and have a disabled spouse or child. The rest should not expect much help from the
fiscus.
