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Medical aid and retirement annuity payments made on behalf of a spouse
- 24 November 2020
- Individuals Tax
- Piet Nel
Background
A couple is married in community of property. The husband is the main member of the medical aid and has a retirement annuity. He lost his job therefore his wife paid 90% of medical aid directly to the medical aid (still in his name). His wife also transferred money into his account to pay his retirement annuity.
Please advise on the following:
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How is this treated as the retirement annuity and medical aid certificates are on the husband’s ITR12?
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Since they are married in community of property, is it necessary to declare a donation from the wife to her husband in order for him to pay his retirement annuity?
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Who should declare the medical aid contributions made?
Answer
Income Tax Act
It is clear that the section 6A rebate is only available “in respect of fees paid by the person”. In other words, the person who paid the fees, gets the rebate. SARS confirms this when they say, in their guide, that “The taxpayer claiming the contributions must be able to prove that he or she actually paid the contributions.” The fact that they “are married in community of property” may well mean that the contribution was jointly made. Unfortunately, the Act doesn’t deal with this. In section 7(2A), the Act refers to “any deduction or allowance which may be made under the provisions of this Act in the determination of the taxable income”, but it doesn’t include a rebate (or credit as it is known).
As far as the medical aid contributions are concerned, as can be seen from what was said above, it indeed matters which one of the spouses claim the credit. It must be the spouse who paid the contributions (and can prove that). Section 11F requires the amounts contributed during a year of assessment to any pension fund, provident fund or retirement annuity fund to be amounts contributed in terms of the rules of that fund by a person that is a member of that fund. It doesn’t have the ‘paid’ requirement.
The amounts transferred from the one spouse to the other, if indeed gratuitously made (unlikely), will be exempt from the donations tax. They need only be declared on an IT144, if the value of other taxable donations made by the spouse exceeds the R100 000 annual cumulative amount.
Webinar Commentary
Further webinar commentary on Exemptions from donations tax can be accessed here.