1. You receive a R20 000 invoice from a Hospital. Your medical aid only pays R15 000. Your GAP cover then pays the R5 000 into your account and you then pay it over to the Hospital. Am I right in stating that an individual can not claim the R5 000 that th
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
As we understand it, the payments in respect of the “GAP cover” don’t constitute fees as envisaged in section 6A(2)(a)(ii). As such, they will also not qualify for a rebate under section 6B(3).
These GAP contributions help the individual to cover the hospitalisation and medical costs that his or her medical aid does not pay out or pay out in full when a claim is made. They are not qualifying medical expenses for purposes of section 6B. In terms of section 6B(1) ‘qualifying medical expenses’ (for purposes of the additional medical expenses tax credit) means “amounts (other than amounts recoverable by a person or his or her spouse) which were paid by the person”.
The SARS Guide on the Determination of Medical Tax Credits and Allowances states that “in order for the expenses to be considered deductible, the expense must not have been recoverable from the taxpayer’s medical scheme.” The Act however doesn’t refer to a medical scheme when the word recoverable is used.
We submit that the word must therefore take its ordinary meaning. The courts have dealt with the words “recover of recoup” in the Omnia Fertiliser case. The Oxford dictionary defines recoverable as “(Of compensation or money spent or lost) able to be regained or secured by means of a legal process or subsequent profits”. We submit that the recovery under the GAP scheme will indeed constitute an amount recoverable.
These contributions therefore don’t constitute amounts for purposes of either section 6A or 6B. We are not sure if the taxpayer would be able to argue that, at least to the extent that the contributions made to the “top-up” scheme were used to pay medical expenses, they will not be seen as a recovery. It comes down to the onus of proof.