As previously discussed on MoneywebTax, there have been several developments in the area of tax relating to the deduction of medical expenses. Since the article of March 10 2010, three further relevant developments have taken place. In the writer’s experience, it is extremely unusual, if not unprecedented that just one section (Section 18) of the Income Tax Act (of just over two pages in length) can receive so much attention in just over three years.
So what is all the fuss about? A broad chronological sequence of events puts the issues into some perceptive and updates readers as to what the current position is.
- On February 2 2007, the Business Report published a front page article on just how wide the provisions, in particular to the number of taxpayers who fell within the definition of mental illness as defined in the old definition of “handicapped person”. For those wanting to refer back to the article, it was written by Ethel Hazelhurst and was entitled “Mental health claims could hit Sars”.
- Sars issued a Tax Guide on the deduction of medical expenses on February 13 2007.
- Between February 2007 and 2009, at least four changes have been made to Section 18 of the Income Tax Act and a second tax guide on medical expenses was issued by Sars.
- In October 2009, Sars issued a discussion paper regarding its proposed “List of qualifying physical impairment or disability expenditure” and “Confirmation of diagnosis of disability”. The most notable of these changes was the deletion of the old definition of “handicapped person” and replacement thereof by a new definition of “disability” (the new definition of “disability” was discussed in a previous article.
- The Business Report, on January 28 2010, published an article on the most notable of the changes in the tax law; that being the deletion of the definition of “handicapped person” and replacement thereof by the new “disability” definition
- On April 21 2010, Sars issued its final version of the issues raised in the discussion paper of October 2009.
- The issue on April 21 2010 sets out the list of qualifying expenditure and has prescribed for a particular form to be completed by the taxpayer and his or her medical practitioner in order to claim full deductions for medical and related expenses under the “disability” provisions.
- The form referred to above will need to be obtained before the 2010 tax returns are submitted, notwithstanding the fact that they do not need to be sent with the return. The form, together with the amount of expenses will need to be retained in the event that the taxpayer’s return is audited.
The above is a reasonable summary of events that have taken place over the last few years.
When Sars and the Treasury jointly and recently issued their tax statistics for 2009, the figures regarding the number of taxpayers who claimed all their tax deductions under the “disabled” code (4009 – the old “handicapped person” definition) for the 2008 tax year is only 20 407 in total, 0.78 of assessed taxpayers. This figure, distressingly, bears no correlation at all to the reality of the number of people who suffered from a “handicap” during the 2008 tax year.
The net result of the above is that just two pages of tax law is a lot more complicated than many believe. For the 2010 tax year, with the wider definition of “disability”, a lot more taxpayers should seek advice on how to make sure they qualify to have all their medical expenses deductible. Similarly, due to the extremely low number of taxpayers who have claimed under the old “disability” provision, tax advice should be sought on the possibility and benefits of re-opening prior-year assessments.
*Eugene Bendel is from Bendels Consulting