Credits, Not Deductions — and Why That Matters
Most tax breaks freelancers use are deductions: they reduce taxable income, so their value depends on your marginal rate. The medical regime works differently. Sections 6A and 6B provide credits — fixed amounts knocked directly off your tax payable. A credit is worth the same rand amount to a taxpayer in the top bracket as to one just above the threshold.
For self-employed people this matters twice over. You carry the full cost of your medical scheme with no employer subsidy, and the credits are the system's contribution back. And because they're predictable, they belong in your IRP6 estimates — not just your final return.
Section 6A: The Medical Scheme Fees Credit
If you contribute to a registered medical scheme, s6A gives a fixed credit per month: one amount for the main member, the same for the first dependant, and a smaller amount for each additional dependant. The amounts are set annually in the Budget — check the current SARS tables for the year's figures rather than relying on remembered numbers.
Key properties:
- It's monthly and mechanical. Membership for the month earns the credit for the month; a family of four earns the credit for four lives.
- Income-independent. No means test, no phase-out.
- Non-refundable. It reduces tax payable, but doesn't create a refund below zero on its own.
For a freelancer paying, say, R5,500 a month for family cover, the s6A credit typically claws back a meaningful slice of that — and since you know your family size and membership months in advance, this number is calculable to the rand in August already.
Section 6B: The Additional Credit
Section 6B is where large medical years get recognised. It looks at two pools:
- Excess contributions — the amount by which your annual scheme contributions exceed four times your total s6A credit for the year.
- Qualifying out-of-pocket expenses — amounts paid and not recovered from the scheme: the shortfalls on specialist bills, prescribed medication, hospital co-payments, dentistry, optometry with a prescription, and similar services by registered practitioners.
For a taxpayer under 65 with no disability in the family, the credit is 25% of the amount by which (excess contributions + qualifying out-of-pocket costs) exceed 7.5% of taxable income. That threshold does real work: a healthy year for a R600,000-income freelancer produces nothing from s6B, while a year with a hospital event, orthodontics, or chronic medication can produce a substantial credit.
Taxpayers 65 and older, or with a disability as defined (their own, a spouse's, or a child's), get a far more generous formula: 33.3% of qualifying expenses plus 33.3% of contributions above three times the s6A credit, with no income threshold.
What counts as "qualifying"
Services and prescriptions from registered medical practitioners, hospitalisation and nursing, prescribed medicines, and expenditure necessitated by disability. What doesn't: over-the-counter purchases without a prescription, gym and wellness spend, cosmetic procedures, and anything your scheme reimbursed. The evidence standard is the usual one — keep the invoices and proof of payment, and your scheme's annual tax certificate, which conveniently summarises both contributions and claims not recovered.
The Freelancer-Specific Angles
Put the credits in your IRP6 arithmetic. The provisional tax calculation runs: estimated taxable income → tax per the table → less rebates → less medical credits → less PAYE → payable. The s6A component is fixed and known; excluding it overstates both provisional payments and hands SARS an interest-free loan until assessment.
Contributions are personal, not business. Medical scheme contributions are not a s11(a) business expense and don't reduce your trade income — a recurring error in freelancer bookkeeping. They live exclusively in the credit system. (Income protection premiums are similarly non-deductible under current rules, with payouts correspondingly tax-free.)
Track the out-of-pocket pool during the year. Because of the 7.5% threshold, s6B is all-or-nothing-ish: you need the full year's qualifying spend in one place to know whether you cross it. A folder for medical receipts, maintained monthly, is the entire system. In a heavy year, that folder is worth real money; in a light year it costs you fifteen minutes.
Family structure is captured on the return. Dependant counts, disability confirmation (via the prescribed ITR-DD form, completed by a registered practitioner), and months of membership all flow through the ITR12. Get the dependant months right — mid-year additions like a new baby change the s6A arithmetic from that month.
The Shape of the Benefit
Think of it as three tiers. Tier one, automatic: scheme membership earns the fixed s6A credit — every freelancer with cover gets this, and it belongs in every estimate. Tier two, threshold-gated: big medical years unlock s6B at 25% — track receipts so you know when you've crossed. Tier three, structural: age 65+ or disability moves you to the generous formula where most medical spend earns a third back.
None of it requires optimisation cleverness. It requires membership certificates, a receipts folder, and remembering that the credits exist twice a year when the IRP6 asks what you expect to owe.