According to section 18 of the Income Tax Act, a contribution to a medical scheme includes:
“…any contributions made by that taxpayer in respect of the year of assessment in respect of that taxpayer, his or her spouse and any dependant, as defined in section 1 of the Medical Schemes Act, 1998 (Act No. 131 of 1998), of that taxpayer to any medical scheme registered under the provisions of that Act”.
Since 1st April 2001, the Medical Schemes Act has allowed medical schemes to apply a late-joiner penalty to an applicant or to the dependant of an applicant who fits the definition of a late-joiner. Therefore the “late joiner” penalty fee forms part of the contribution to the medical scheme, and must be administered and taxed as a medical aid contribution.