With the start of the new financial year looming ahead of us, lawmakers have been hard at work drafting legislative changes that will require Payroll administrators to keep their wits about them if they want to keep up.
To make your life easier, we make it our business to keep abreast of any and all changes that could effect how you process your payroll. In the coming weeks, we will be posting some of the most interesting changes that you should be taking note of, so be sure to check back regularly.
One of the most significant changes taking place in the upcoming financial year, is the introduction of the Additional Medical Tax Credit (AMTC).
This credit serves to give tax relief to employees who are over the age of 65, in the form of an increased Medical Tax Credit for each month.
As of 1st March 2016, employees aged 65 and up will be eligible to receive an additional reduction to the monthly amount of PAYE withheld to the value of 33.3% of the excess total contribution paid to the medical scheme that exceeds three times the regular Medical Tax Credit value. This Additional Medical Tax Credit will be reported separately from the Medical Tax Credit on the tax certificate.
An employee makes a monthly contribution of R1500 to his medical aid and has no dependents. The Medical Tax Credit in this case would be R270.
To calculate the Additional Medical Tax Credit, we first need to determine difference between 3 x R270 and the contribution. In this case the calculation would be as follows:
R270 x 3 = R810
R1500 – R810 = R690
R690 x 33.3% = R229.77 Additional Medical Tax Credit
This employee would then receive a total tax credit tax credit to the value of:
R270 (Medical Tax Credit)
+ R229.77 (Additional Tax Credit)
= R499.77 (Total Medical Tax Credit)
You’ll be glad to know, that our development team has been hard at work in order to ensure that this feature will be ready to go from the first of of March, with absolutely no additional input required from your side.
As always, if you have any comments or concerns, feel free to get hold of us in the comments or through our super helpful support team 🙂