PAYE relief for over-65s who belong to medical schemes

TAXPAYERS over the age of 65 who belong to medical schemes may see an increase in their monthly incomes if National Treasury's proposals to amend the Pay As You Earn (PAYE) and provisional tax calculations are implemented.

Personal Finance, 25 July 2015

All taxpayers who contribute to a medical scheme are entitled to a tax credit of up to R270 a month for the main member and the first dependant on the scheme and up to R181 a month for each additional dependant. This is known as the medical scheme contribution tax credit.

Taxpayers over the age of 65 are also entitled to a tax credit of 33.3 percent of their qualifying medical expenses, and a tax credit of 33.3 percent of the amount by which their contributions exceed three times the medical scheme contribution tax credit. Currently, these tax credits are not taken into account when monthly PAYE deductions and provisional tax are calculated; they must be claimed on assessment at the end of the tax year.

As a result, some over-65s have experienced cashflow problems during the year. Therefore, National Treasury has proposed that medical tax credits related to medical scheme contributions by people over 65 should be taken into account to reduce both monthly PAYE and the calculation of provisional tax. If the proposal is implemented, it will take effect on March 1, 2016.