– (3 March 2010-TaxTalk)              

Johannesburg, 1st March, 2010 – The full amount of medical aid contributions paid by an employer will be a taxable fringe benefit from 1st March and subsistence allowance rates for travel increase today.

This is according to Ron Warren, an acknowledged tax expert and Chairman of payroll software company nuQ, who says that the full amount of any medical aid contribution paid by an employer will be a taxable fringe benefit with effect from 1 March 2010 and the taxable benefit value may not be reduced by the cap amount.

He says that this has no effect on the tax payable by the employee, as the medical aid contribution paid by the employer and taxed as a fringe benefit is deemed to have been paid by the employee (see section 18(5)(b) of the Income Tax Act).

“The cap amount which would in the past have reduced the taxable value of the employer contributions will now be allowed as a deduction from the employee’s taxable income,” Warren adds.

With regard to medical aid cap amounts, he says that the monthly cap amount applicable to persons aged less than 65 has been raised from R625 to R670 each for the first two persons covered by a medical aid contribution, and from R380 to R410 for each additional dependant, effective 1 March 2010.

Subsistence allowance rates for travel in South Africa increase with effect from 1 March 2010 to R85 per day for incidental costs only, and R276 per day for meals and incidental costs.

Warren explains that for travel outside South Africa, separate rates have been prescribed for approximately 200 countries outside South Africa, either in the country’s own currency, in US dollars or in euros.

Since SARS has given no guidance as to which rate of exchange is to be used when converting the foreign currency amounts to rands, as has to be done for accounting and tax reporting purposes, Warren suggests that the easiest is probably to use the rate on the date the advance was made to the employee, or the date actual expenses were reimbursed.