A taxpayer who incurs medical expenditure may be entitled to two different medical tax credits:
- A credit on contributions made to your medical aid; and
- An additional medical expenses tax credit in respect of qualifying medical expenditure paid by you that you are not able to recover (for example, from your medical aid). This is also known as qualifying out-of-pocket medical expenses.
Where you make contributions to a registered medical aid for yourself and any dependents, you qualify and are able to claim a Medical Scheme Fees Tax Credit (MTC). The MTC is set at a fixed monthly amount for every month of your membership during the relevant tax year for you and your dependents. The Additional Medical Expense Tax Credit (AMTC), in turn, is a rebate that reduces the tax payable by the taxpayer in respect of qualifying out-of-pocket medical expenses. The AMTC is additional to the MTC and can be claimed irrespective of whether or not you have medical aid. For more on the MTC and AMTC, see our blog post of 16 July.
An example of out-of-pocket medical expenses is any expenses prescribed by the Commissioner and necessarily incurred as a result of any physical impairment or disability. A disability is defined under the AMTC as:
“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—
has lasted or has a prognosis of lasting more than a year; and
is diagnosed by a duly registered medical practitioner in accordance with criteria prescribed by the Commissioner”
If the taxpayer, their spouse or their dependent has a qualifying disability, they may claim qualifying expenses under the AMTC. The amount of the AMTC is calculated as the aggregate of the following two amounts:
- 33.3% of the total amount you had paid to your registered medical aid for that year of assessment minus three times the MTC you claimed for that year of assessment; and
- 33.3% of the qualifying medical expenditure paid by the person.
It is important to consider whether an impairment constitutes a “disability” and, if so, whether the amounts paid (and not recoverable) constitute qualifying additional medical expenditure. SARS also published a list of qualifying physical impairment or disability expenditures (revised on 29 October 2021) to assist taxpayers in determining whether expenditures will qualify. This is a factual question to be determined by the facts of each case.
The AMTC is claimed when you submit your annual income tax return. For SARS to be considered the AMTC, you will also need to complete the prescribed “Confirmation of Diagnosis of Disability” (ITR-DD) form. This form includes the details of the person with the disability, the person incurring the expenditure, and the diagnostic criteria to be completed by a duly registered medical practitioner.
Although provision is made to claim the AMTC for out-of-pocket medical expenses in relation to a person with a disability, it is not a simple and straightforward matter. These matters can be quite complex, and it is, therefore, suggested that you consult a tax advisor when claiming AMTC.