Is a South African medical aid scheme a form of insurance? I have a client who lives in Australia and pays monthly premiums to to Medibank Private Ltd in Australia, and in the past SARS has accepted the claim for medical tax credits. However this year the
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We think that your request doesn’t relate to whether “a South African medical aid scheme a form of insurance”, but rather if the contributions to Medibank Private Ltd in Australia would qualify under section 6A of our Income Tax Act. The law is found in section 6A and the relevant part (in section 6A(2)(a)(ii)) reads as follows; “a fund which is registered under any similar provision contained in the laws of any other country where the medical scheme is registered”.
The test must therefore be done with reference to the provisions contained in the Australian laws in terms of which Medibank Private Ltd.
We are not sure, but for purposes of the guidance that follows, we accepted that the basis for the disallowance of the objection was that foreign entity is not one that is regulated under legislation that is similar to the RSA Medical Schemes Act.
SARS, in issue 9 of their guide, states that “certain medical-related arrangements or products are marketed by entities that are not regulated by the MS Act, for example, long-term insurers. These products do not qualify for an MTC in South Africa; similarly if a foreign product is marketed by an entity that is not regulated under legislation that is similar to the MS Act, it will not quality for an MTC.”
As in the RSA, if the product falls under an insurer (long term or short term) in Australia, we submit that it would not be similar to medical scheme registered under the Medical Schemes Act (in the RSA).