Medical aid members can hold on to credits

Following Health Minister Aaron Motsoaledi’s comments last year regarding the proposed removal of the medical expense tax credit in order to fund the National Health Insurance (NHI), medical aid members will have found  some relief in yesterday’s Budget Speech which still accommodates this measure.

Medical expense tax credits are effectively used as a reduction of the tax payable by medical aid members. Now the government is trying to find funding for the government’s long proposed NHI. So the Minister has alluded to redirecting this credit towards the government’s health budget.

Jill Larkan on the Budget Announcement

“The Budget Speech provided more clarity on the funding of the NHI. An additional R4.2 billion was allocated to this initiative, funded by an amendment to the medical expense tax subsidy,” says Jill Larkan, Head: Healthcare Consulting at leading wealth and financial advisory firm GTC.

The amount of credits receivable by an average – two adults and two children – family for the 2018 tax Medical Aid Tax Credit 2018year is R12 168. The increase is 2.3% to R12 456.

“On the face of it, this might seem like an insignificant increase, given the level of medical inflation. Also, the average increases in this tax credit in previous years which has fluctuated between 5% – 6%. However, considering the overall size of the budget shortfall and the subsequent pursuit of revenue from various sources, medical aid members should be happy that this credit did not disappear completely,” she says.

Tax Credit Apportionment

This allows for the redistribution of some portion of the tax credit towards the funding of the NHI. The government can also use it for other identified significant expenditure items, such as fee-free higher education.

“This should give medical aid members some time to become accustomed to a complete phasing out of this tax credit. Although, admittedly, it may seem painful at the moment,” she says.

“We look forward to receiving more clarity and detail on the implementation and funding of the NHI in the foreseeable future, particularly on how this is going to fit into the existing medical care landscape,” concludes Larkan.