Out Of Pocket Medical Expenses
If you are out of pocket for medical expenses for you and your dependants in the 2013 financial year, you may be entitled to claim a tax offset. To determine the out of pocket amount you must deduct from the total of the eligible expenses any amounts reimbursed to you.
The Net Medical Expenses Tax Offset is subject to income testing. Taxpayers with an adjusted taxable income above $84,000 for singles or $168,000 for a couple or family in 2012-13 will be affected. The family threshold will increase by $1,500 for each dependent child after the first. These taxpayers can claim a reimbursement of 10% for eligible out of pocket expenses incurred in excess of $5,000 (indexed annually).
Taxpayers with an adjusted taxable income below these thresholds will continue to be able to claim a reimbursement of 20% for net medical expenses over $2,120 (CPI indexed for 2012-13) when they lodge their tax return.
The medical expenses must be for:
- your spouse – married or de facto – regardless of their income
- your children who were aged under 21 years, including adopted and stepchildren, regardless of their income
- any other child aged under 21 years – not a student – who you maintained and whose Adjusted Taxable Income (ATI) was less than $1,786 for the first child and less than $1,410 for the second child and any subsequent children
- a student aged under 25 years whom you maintained and whose ATI was less than $1,786
- a child-housekeeper, but only if you can claim an amount for them as part of your Zone or overseas forces tax offset at item T5 on your tax return or could have claimed for them had your ATI or the combined ATI of you and your spouse not exceeded $150,000
- an invalid relative, parent or spouse’s parent, but only if you can claim for them at item T5 or could have claimed a tax offset for them at item T5 had your ATI or the combined ATI of you and your spouse not exceeded $150,000
- a dependant (invalid or carer), but only if you can claim for them at item T7 or could have claimed for them at item T7 had your ATI or the combined ATI of you and your spouse not exceeded $150,000.
Medical expenses which qualify for the tax offset also include payments:
- to legally qualified medical practitioners, nurses or chemists in respect of illness or operation on you or your dependants.
- to dentists, orthodontists or registered dental mechanics
- to opticians or optometrists, including for the cost of prescription spectacles or contact lenses
- to a carer who looks after a person who is blind or permanently confined to a bed or wheelchair
- for therapeutic treatment under the direction of a doctor
- for medical aids prescribed by a doctor
- for artificial limbs or eyes and hearing aids
- for maintaining a properly trained dog for guiding or assisting people with a disability (but not for social therapy)
- for laser eye surgery
- for treatment under an in-vitro fertilisation program
- for residential aged care expenses
- to nursing homes or hostels (not retirement homes) for an approved care recipient’s permanent or respite care, provided the payments were made to an approved care provider and were for personal or nursing care - not just for accommodation.
Non-claimable expenses - Expenses which do not qualify for the tax offset include payments made for:
- cosmetic operations for which a Medicare benefit is not payable
- dental services or treatment that are solely cosmetic
- therapeutic treatment where the patient is not formally referred by a doctor – a mere suggestion or recommendation by a doctor to the patient is not enough for the treatment to qualify - the patient must be referred to a particular person for specific treatment
- chemist-type items purchased in retail outlets or health food stores, such as tablets for pain relief
- vaccinations for overseas travel or for protecting the taxpayer from illness (such as Hepatitis C) even if required by employer
- non-prescribed vitamins or health foods
- travel or accommodation expenses associated with medical treatment
- contributions to a private health insurer
- purchases from a chemist that are not related to an illness or operation
- life insurance medical examinations
- ambulance charges and subscriptions, and
- funeral expenses
What records do you need to keep?
- details of the medical expenses you wish to claim
- details of refunds you received, or are entitled to receive, from Medicare or a private health insurer
- a list of prescriptions purchased from a pharmacist
* The threshold is indexed annually.
Net Medical Expenses Tax Offset Phase Out
On 14 May 2013, the Government announced in the 2013-14 Budget that it will phase out the Net Medical Expenses Tax Offset.
From 1 July 2013, those taxpayers who received the offset in their 2012-13 income tax assessment will continue to be eligible for the offset for the 2013-14 income year if they have eligible out-of-pocket medical expenses above the relevant claim threshold. Similarly, those who receive the tax offset in their 2013-14 income tax assessment will continue to be eligible for the offset in 2014-15.
The changes mentioned above will not apply to all taxpayers - the offset will continue to be available for taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019.
We have record cards available for you to use to keep the necessary records. Just ask at one of our offices, click here to locate nearest office or call 13 23 25.