When mental illness is tax deductible

Isaac Moledi

Isaac Moledi

Experts say taxpayers who think they are entitled to claim for mental health conditions should consult tax consultants before submitting tax returns.

Tax consulting firm Bendels Consulting announced recently that taxpayers were entitled to claim for all mental health expenses of a member or dependents.

The firm said this was in terms of the recent findings on income tax legislation and the changed tax rules for the 2007 tax year for medical expenses.

The 2007-08 tax returns are due for submission from the middle of July.

Though Sars does not refute claims that taxpayers are entitled to claim for all medical expenses regarding psychological illnesses, it says it will look at expenses not covered by medical schemes.

But it also imposes different limitations on those with serious mental illnesses.

The definition of a mental illness, says Bendels Consulting, is wide and the list exceeds 200. It includes depression, personality disorders, insomnia, anorexia, attention deficit disorder and hyperactivity disorder, bereavement, sexual dysfunction, bipolar disorder and anxiety.

Of the more than five million registered taxpayers, Bendels says up to 20percent (depression alone accounts for about 10percent) are affected by the mental health provisions.

"So, we are looking at about a million taxpayers who could get tax back or pay less tax than they might otherwise have thought possible.

"In addition, even taxpayers who are not registered for tax because they only pay Standard Income Tax on Employees [Site] can get tax back," says Bendels.

The firm says up to 5percent of last year's tax returns were incorrectly submitted and assessed.

Bendels says because of the complex nature of the tax law relating to medical claims, as well as the high medical aid contributions, even the best schemes are unable to pay all claims.

This results in large amounts of medical aid contributions and irrecoverable expenses.

"If, for example, a member of the taxpayer's family has a mental illness, the taxpayer is entitled to deduct all the medical expenses."

The expenses might have incurred as a result of consulting a homeopath, herbalist, naturopath, physiotherapist, plastic surgeon, cosmetic or dental surgeon or rehabilitation clinics.

In addition, Bendels says any expense incurred in consequence of any physical disability may also be deductible. These might include remedial school fees, travel costs and costs of adapting a motor vehicle.

But the taxpayer will need to carry out a reconciliation of total expenses paid, less those expenses reimbursed by the scheme.

"All medical aid contributions will be allowable either by way of an exemption from fringe benefits tax and or as a deduction under Section 18 of the Income Tax Act," Bendels says.

The firm believes relying on the income tax certificate from the medical scheme alone is unlikely to suffice because there might well be other expenses that the taxpayer can deduct.