The R10,000 Hit: How One Tax Change Could Shrink South Africans’ Paycheques and Shake Up Private Healthcare

South Africans Could Lose Over R10,000 a Year as Government Plans to Scrap Medical Aid Tax Credit

South Africans could soon take home less each month as the government moves to phase out medical scheme tax credits (MTC) a change that could strip taxpayers of more than R10,000 in annual savings and make private healthcare even less affordable.

Tax experts warn that while the shift aligns with the government’s long-term plan to fund the National Health Insurance (NHI), it’s likely to hit middle-income earners the hardest in the short term.

“This is a major change in how healthcare is funded in South Africa,” said Hlengiwe Mkhize and Buyile Zondi, senior tax consultants at Tax Consulting SA. “It supports a fairer healthcare system under the NHI, but it could have a significant short-term impact on taxpayers and private medical scheme members.”

What the Medical Scheme Tax Credit Actually Does

The Medical Scheme Tax Credit (MTC) is a rebate given to taxpayers who belong to a registered medical aid scheme, not to be confused with medical insurance, which does not qualify.

Essentially, the MTC reduces your tax payable rand-for-rand, making it more valuable than a simple deduction. The credit automatically lowers your PAYE tax if your medical aid is processed through your employer’s payroll.

For a typical taxpayer with a spouse and three dependents, the MTC currently looks like this:

• R364 each for the main member and first dependent = R728

• R246 each for the remaining three dependents = R738

• Total monthly credit: R1,466

• Annual saving: R17,592

It’s a vital cushion that helps millions of South Africans manage rising healthcare costs. But once the government scraps it, those savings disappear, effectively raising taxes by thousands of rands per year.

Why Government Wants to Scrap It

Phasing out the MTC forms part of South Africa’s effort to fund the National Health Insurance (NHI) a universal healthcare plan intended to ensure everyone has access to medical treatment, regardless of income.

Under the NHI, government hopes to pool resources that currently subsidise private healthcare through tax credits and redirect them to the public system.

In theory, this levels the playing field. But in practice, experts say it could widen the affordability gap before the NHI is fully ready.

“While this could improve access to public healthcare, it may make private healthcare less affordable for those who rely on it,” said Mkhize and Zondi. “Middle- and low-income earners, in particular, may be affected most.”

The Middle-Class Squeeze

The removal of the MTC will immediately raise PAYE deductions for employees whose medical aid is processed through their payroll. Employers will need to adjust systems and prepare for backlash, as take-home pay shrinks overnight.

The ripple effects are easy to predict:

• More people dropping or downgrading medical aid.

• Increased pressure on an already overburdened public health system.

• Strained employer-employee relations over pay slip changes.

On social media, the early reaction has been sharp. Many South Africans have described the move as “short-sighted” and “tone-deaf” given the country’s cost-of-living crisis.

“So, we’re paying more tax, losing benefits, and still funding a broken public system? Madness,” one user posted on X (formerly Twitter).

What It Means for You

If the MTC is removed, the impact depends on your family size and income bracket. For example, a family of five currently saves around R17,592 per year through the credit. Losing that cushion would immediately reduce disposable income, the equivalent of losing a month’s salary for many South Africans.

For retirees, the elderly, or families supporting dependents with disabilities, the pain could be worse. These groups often rely on additional medical tax relief that might also be affected.

Tax experts recommend that individuals:

• Review their medical cover to ensure it still meets their needs.

• Budget for higher out-of-pocket medical expenses.

• Explore gap cover or medical savings plans for added protection.

• Keep detailed receipts for all medical expenses, which may still qualify for smaller deductions under certain circumstances.

A Policy with Good Intentions, But Poor Timing

While few would argue against improving access to healthcare for all South Africans, the government’s timing is raising eyebrows. The NHI is still in its infancy, facing funding questions, logistical hurdles, and resistance from the private sector.

Removing a major tax relief before the new system is operational could push more South Africans out of private healthcare altogether, leaving the public sector with a surge in demand it may not be ready to handle.

As one financial analyst noted:

“It’s like taking away the life jacket before the rescue boat even arrives.”

The National Treasury and SARS are expected to provide more clarity on the phase-out timeline and how funds will be redirected. In the meantime, taxpayers are advised to plan ahead, because by the time the next filing season arrives, many could find themselves paying more and getting less.

As Mkhize and Zondi conclude, “Taxpayers’ healthcare planning remains a key part of financial management. This is the time to review, save, and prepare.”

{Source: Daily Investor}

Follow Joburg ETC on Facebook, Twitter , TikTok and Instagram

For more News in Johannesburg, visit joburgetc.com