Joined: 04 Apr 2005
|Posted: Thu Nov 01, 2012 8:51 am Post subject: Medical Aid Tax Codes
|The following summary explains the new 2012 medical aid tax codes.
EMPLOYEES YOUNGER THAN 65
Please note: The APM* codes are the payroll's internal codes for the Medical Aid predefined transaction APMA.
4474 - Total company contribution (APM1)
* Legally retired under code 4493
3810 - Fringe benefit part (APM3)
* This code is the full value of the company contribution from the 2012 tax year (tax credit system)
This code is taxable, UIF applicable and subject to SDL
4005 - Deduction (APM4)
* The value of 4005 on the tax certificate will be equal to the "actual deduction" from the employee, + the value of 3810 above
4116 - Tax Credits (APM5)
* Calculated by the number of employee dependants. The tax-credits is a deduction transaction in the payroll system, but is reflected with a "negative" value, thus having a "payment effect" on the employee's salary
APM2 in the payroll system, is an internal calculation code (not linked to an IRP5 tax code)
From the 01st of March 2012, the medical aid caps will no longer be allowed as a tax deduction (before calculating PAYE), but will be replaced by medical aid "tax credits".
These credits are deducted after calculating PAYE for the employee.
Although employees will still receive tax relief in the form of medical aid "tax credits", employers will now have to budget for higher SDL contributions - as the taxable remuneration used to calculate the 1% contribution - will no longer be reduced by a tax deduction for medical aid contributions.
The same increase will be noticeable in the UIF contributions made by, and on behalf of employees aged 65 years and older.
Although medical aid contributions made by older employees are fully tax deductible, SARS will require the portion contributed by the employer "on behalf of the employee", to be included in their taxable remuneration as a fringe benefit under code 3810.
UIF is calculated on Gross Taxable remuneration, before allowing tax deductions. Including the medical aid contribution as a fringe benefit for employees 65 and older, will result in an increased UIF contribution for both the employee and employer.