Medical Aid Expenses and SARS – Out of Pocket Expenses and Supporting Documents
Date: 12 July 2021
Author: Coenraad de Beer
Claiming medical aid expenses on your tax return is not a case of just taking the totals on your medical aid tax certificate and capturing them blindly on your income tax return. Although these figures are now pre-populated on your tax return, it does not mean that they are 100% correct all the time. You still need supporting documents in order to substantiate these claims. SARS may not request these documents every time you submit your tax return, but it is important to keep proper record of your medical aid expenses and retain them for a period of 5 years after you have been assessed.
During the 2018 tax year, SARS started to do intensive audits on medical expense claims. One thing that stood out on the 2018 tax return was the distinction SARS made between the two types of medical expenses, namely:
1. medical expenses, paid by you, that were claimed from your medical aid and reflected on your medical aid tax certificate; and
2. medical expenses, paid by you, that were NOT claimed from your medical aid and NOT reflected on any medical aid tax certificate
There is also a 3rd category, namely disability expenses, but these expenses have always been declared separately on a tax return.
1. Medical aid expenses claimed from your medical aid
Whenever you make a co-payment at your doctor or at the pharmacy, the medical practitioner will most likely send this information to your medical aid. This is also true in cases where you get an account from the hospital or a doctor, where the medical aid only paid a portion of the bill and you need to pay the balance out of your own pocket. These amounts are accumulated by your medical aid and this is the total value of the out-of-pocket expenses, shown on your medical aid tax certificate.
It is important to note, even though your medical aid keeps track of these expenses, you should still retain the invoice and proof of payment. The onus rests with you, the taxpayer, to produce proof of payment. If your medical aid lists an expense on your tax certificate, but the amount was not yet paid by the end of February, you will only be able to claim it in the year it was actually paid. SARS knows you cannot take the amount on the medical aid tax certificate at face value and that is why they insist on proof that these amounts were actually paid.
2. Medical aid expenses NOT claimed from your medical aid
When you exhausted your medical aid savings account, reached the annual limit for certain procedures, or know beforehand that a procedure will not be covered by your medical aid, you will most likely not even try to claim these expenses from your medical aid and your medical aid will not include these amounts on your tax certificate. You need to keep a separate record of these medical expenses, since you need to declare them separately on your tax return. Once again, the invoice alone is not adequate proof that you paid the bill, you also need to supply the proof of payment (EFT printout, a credit card slip or a cash receipt).
3. Disability expenses
Taxpayers who are disabled or have a dependant with a disability may claim medical expenses, related to the disability, on a separate section of the income tax return. This is a special type of medical aid expense with its own set of rules, therefore the documentary proof of these expenses should be kept separate from the two types of expenses mentioned above. In addition to the invoices and proof of payments, you also need a special form called an ITR-DD. This form has to be completed by a duly registered medical practitioner, who is trained to diagnose the applicable disability or to express an opinion on it. This form is valid for a period of 10 years, provided the disability remains moderate to severe.
How to prepare the medical aid supporting documents for submission
SARS reviews your supporting documents in the same way a teacher would review an exam paper. If the exam paper is untidy, poorly organised and riddled with illegible handwriting, the teacher will be less inclined to give you the benefit of the doubt if he/she cannot make out what you were trying to say. The same holds true for your medical aid expense supporting documents. If your pharmacy slips are hard to read, the amounts on an invoice do not match with the proof of payment, or your documents do not add up to the total amount claimed on your income tax return, the SARS auditor will be more inclined to deny your claim.
So in order to save time, money and improve your chances of a successful claim, we suggest the following tips if you have a lot of medical bills to submit to SARS:
1. Group the documents together, based on the three types of medical aid expenses discussed above. One group of documents for expenses claimed from our medical aid, but not covered or partially covered by your medical aid. A second group of documents, for expenses paid out of pocket, but never claimed from any medical aid and a third group of documents related to disability expenses.
2. Order the documents of each group by date. It is much easier to summarise and cross check the expenses if they are ordered by date.
3. Stick the smaller slips (Clicks, Dis-Chem or small cash receipts) to a sheet of paper (A4 in size). Try to fit as many slips as possible on one page, without obscuring the contents of the slips. Remember these pages need to be scanned and uploaded on SARS eFiling, so do not stack the slips on top of each other, the SARS auditor will not be able to lift the slips up to check underneath them.
4. Make sure your invoices are accompanied by some proof of payment (credit card slip, EFT printout or a cash receipt). Simply writing the word “Paid”, along with a date of payment on the invoice, is not adequate proof that it was paid. Whenever you pay a bill in cash, insist on a cash receipt, as this will constitute proof that the bill was actually paid.
5. If there are multiple items on a pharmacy slip and some do not relate to your medical aid expense claims, only highlight the items you are claiming, or delete the items that are not applicable. You do not want to confuse SARS with unnecessary information or give them any impression that you are claiming expenses that are not allowed by the act.
6. Exclude bills for over-the-counter medication. Only medication prescribed by a registered medical practitioner is allowed for income tax purposes (refer to section 6B(1) of the Income Tax act).
In addition to your medical bills, slips and receipts, SARS might request a statement from your medical aid for a detailed breakdown of the out-of-pocket expense total, shown on your medical aid tax certificate. Some medical aids issue this breakdown along with the tax certificate and it will be nice if all medical aids can follow suit. These breakdowns are often helpful to identify expenses for which there are no documentary proof.
Many taxpayers might feel overwhelmed by all these requirements and quite understandably so. The audits conducted by SARS and their numerous requests for further information sometimes feel unnecessary, especially in cases where the medical aid expense claims are pretty straightforward. This begs the question, is it fair to place such a big administrative burden on taxpayers, especially our senior citizens, where the cost and effort of submitting these documents are diminishing the value of claiming? What is the point of simplifying the assessment process with the pre-population of returns, if the audit process remains cumbersome and sometimes quite inefficient? One can only hope for improvement as we make advances in technology.
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