Proposed Tax Relief For Over 65’s

The National Treasury has proposed that the Pay as You Earn (PAYE) and Provisional Tax calculations be amended so as to provide some relief to taxpayers who are 65 years and over.

The proposal is that taxpayers over 65, who make contributions to medical schemes will be able to use their medical tax credit amounts to reduce both their monthly PAYE and the calculation of their provisional tax.

Currently these tax credits are not taken into account when monthly PAYE deductions and provisional tax is calculated – they are only allowed to be claimed on assessment at the end of the tax year.

For the 2015/2016 year of assessment, over 65’s who contribute to a medical scheme are entitled to a tax credit of up to R270 a month for the main member and first dependant on the scheme, and another R181 per month for any additional dependant. Over 65’s are also entitled to a tax credit of 33.3% of their qualifying medical expenses, and a tax credit of 33.3% of the amount by which their contributions exceed three times the medical scheme contribution tax credit.

Should the proposal be implemented, it will take effect as from the 1st March 2016. These changes aim to bring about relief for over 65’s, in that their monthly cash flow will improve during the course of the year.

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