Author: Ilsa Groenewald, Associate Director, Tax, BDO Durban
Tax expert offers guidance on SARS changes to tax claims for medical disabilities
06 August 2015 – Taxpayers who have a disability, or who have a spouse or child with a disability, should be aware of the claims that can be made when completing their 2015 income tax return.
‘The medical tax calculation has changed for the 2015 tax year’, said Ilsa Groenewald, Associate Director for tax at the Durban office of audit, advisory and tax firm, BDO South Africa.
According to Groenewald, a Medical Tax Credit (MTC) can now be claimed by taxpayers for themselves or their dependants, for each month in the year of assessment for which the contributions are paid.
An allowance for the medical expenses may also be claimed, equal to the sum of the following:
• All permitted out-of-pocket and prescribed disability or physical impairment expenses.
• Medical scheme contributions paid by the taxpayer to a registered medical scheme that exceed four times the MTC that the taxpayer is entitled to.
‘Only expenditure prescribed by the Commissioner, that was paid by you in respect of the disability, will be able to be claimed by you,’ Groenewald said.
She went on to say that it was important to note that the prescribed expense must be necessary and in consequence of the disability.
‘An example used by SARS is that, if you are in a wheelchair and you purchase a hand-held GPS, the cost of the hand-held GPS will not qualify as a disability expenditure. This is because the hand-held GPS is not directly connected to your disability,’ Groenewald explained. ‘However, if you are visually impaired, the cost of the hand-held GPS may qualify as disability expenditure.’
Groenewald said that the word “disability” was defined as a moderate to severe limitation of a person’s ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment. The limitation must have lasted, or have a prognosis of lasting more than a year, and it must have been diagnosed by a registered medical practitioner in accordance with criteria prescribed by the Commissioner. See Table 1.
She said that the 7,5% limitation did not apply if the disability was in accordance with the published criteria.
‘It is important to note that the full allowance may only be claimed if you, your spouse or your child has the disability. Disability expenses incurred in respect of a foster child, for example, would be subject to the 7,5% limitation.’
‘SARS is also very clear on the prescribed diagnostics criteria for a certain disability,’ she said. ‘This is based on assessing the functional impact of the impairment on a person’s ability to perform his or her daily activities, and not on the diagnosis of a medical condition.’ See Table 2.
‘Another noteworthy detail is that SARS regards a disability as “temporary” if that disability is expected to last less than 5 years.’
Groenewald said that anyone wishing to make a medical allowance claim should complete the ITR-DD form available on the SARS website –www.sars.gov.za.
‘Care must be taken to complete all three parts (A, B and C) of this form as SARS will reject the claim if it is incomplete. I would advise people to consult a certified tax practitioner before submitting the claim to ensure that the process is problem-free.’
‘It is also important to be aware that the ITR-DD form must be endorsed and signed by a registered medical practitioner,’ Groenewald said.
The form must also be signed by the person with the disability. The parent, guardian or court-appointed curator may also sign if the taxpayer is a minor, or the person is physically or mentally unable to do so.
‘It is essential that the taxpayer retains all documentation for audit purposes as SARS could call for proof at any time. This includes proof of contributions paid to the medical scheme as well as a tax certificate from the scheme, indicating the total amount of claims paid. It also includes a complete list of amounts not submitted, but paid by the taxpayer as well as a letter from the medical scheme stating that the benefits allocated to certain medical procedures were exhausted.’
Groenewald said that if taxpayers who could benefit from this additional medical deduction were unsure about how to complete the documentation, they should consult a reputable tax practitioner. She said that they were welcome to contact her at BDO Durban firstname.lastname@example.org or 01010606771.
TABLE 1: SARS-APPROVED MEDICAL PRACTITIONERS
Vision: Optometrist or ophthalmologist
Hearing: Ear, nose and throat specialist or audiologist
Speech: Speech language pathologist
Physical: Orthopaedic surgeon, neurosurgeon, physiotherapist or occupational therapist
Intellectual: Psychiatrist or clinical psychologist
Mental: Psychiatrist or clinical psychologist
TABLE 2: SARS DIAGNOSTIC CRITERIA FOR DIFFERENT DISABILITIES
The minimum requirement for a person to be classified as a “blind” person is:
1) Visual acuity in the better eye with best possible correction, less than 6/18(0,3)
2) Visual field, 10 degrees or less around central fixation.
“Best possible correction” refers to the position AFTER a person’s vision has been corrected by means of spectacles, contact lenses or intraocular (implanted) lenses.
The figure 6/18 means that, what a person with normal vision can read at 18 metres, the person tested can only read at 6 metres.
A person is regarded as having a moderate to severe communication disability if, despite appropriate therapy, medication or suitable devices, one or more life activities is substantially limited if:
1) They are unable to make themselves self-understood to familiar communication partners using speech in a quiet setting.
2) They are unable to make themselves self-understood to both familiar and non-familiar communication partners. Also, they are unable to meet the appropriate communication needs for their age by using less than 30 intelligible words.
3) They have a problem understanding meaningful language by familiar communication partners that leads to substantial difficulty in communicating.
4) They need to reply on AAC (augmentative or alternative communication) including unaided (eg. sign language) or aided means of communication such as communication boards and speech generating devices.
Someone is regarded as a person with a disability, if they are:
1) Unable to walk (need to use a wheelchair)
2) Only able to walk with the use of assistive devices, such as callipers, crutches, walking frames and other similar devices.
3) Able to walk without the use of assistive devices, but with a degree of difficulty, for example people with cerebral palsy and polio.
4) Functionally limited in the use of the upper limbs.
With the exclusion of intellectual disability, a person is regarded as having a mental disability if they have been diagnosed by a mental health care practitioner who is authorised to make the diagnosis in accordance with the diagnostic criteria prescribed in the Diagnostic and Statistical Manual IV-TR (DSM-IV-TR). This diagnosis must indicate that the mental impairment disrupts the daily functioning of a person, which moderately or severely interferes with or limits the performance of major life activities such as learning, thinking, communicating and sleeping.
To understand the terms moderate and severely, these are described as follows:
1) Moderate: A global assessment functioning (GAF) score of 31-60.
2) Severe: A GAF score of 30 and below.
The term “hearing disability” refers to the functional limitations resulting from a hearing impairment. It is a sensory impairment that will influence verbal communication between the speaker and the listener. There is also a difference between an adult and a child.
A person is considered moderately to severely hearing impaired, when the hearing loss without any amplification device is:
1) Bilateral: pure tone average in each ear is equal to or greater than 24dBHL for an adult and 15dBHL for a child.
2) Unilateral: pure tone average in the affected ear is equal to or greater than 40dBHL for an adult and 20dBHL for a child.
A person is regarded as having an intellectual disability if they have a moderate to severe impairment in intellectual functioning that is accompanied by a significant limitation in adaptive functioning in at least TWO of the following skill areas:
– Home living
– Social or interpersonal skills
– Use of community resources
– Functional academic skills, work, leisure, health and safety
1) Moderate impairment: IQ of 35 to 49
2) Severe impairment: IQ of 34 and below
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