Out of Pocket Medical Expenses

Who can claim for Medical Expenses?

If you are out of pocket for medical expenses for you and your dependants in the 2014 financial year, you may be entitled to claim a tax offset.  To determine the out of pocket amount you must deduct any amounts reimbursed to you from the total of the eligible expenses. 

The Net Medical Expenses Tax Offset is subject to income testing.  Taxpayers with an adjusted taxable income above $88,000 for singles or $176,000 for a couple or family in 2013-14 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 $5,100 (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 $2,162 (indexed annually) when they lodge their tax return. 

Net Medical Expenses Tax Offset Phase Out

The Net Medical Expenses Tax Offset is repealed from 1 July 2019.  The amending Act received royal assent on 18 March 2014.

The offset is to be phased out by way of two sets of transitional arrangements.  For these purposes the existing medical expenses that may be claimed have been placed into one of two categories: 

  • Category A: From the 2013-2014 income year until the end of the 2018-2019 income year:

Taxpayers can only claim the Net Medical Expenses Tax Offset for medical expenses that both meet:  

- the current definition and eligibility requirements, and

- relate to disability aids, attendant care or aged care.

  • Category B: For the 2013-2014 income year and 2014-15 income year:

Taxpayers will be eligible to claim the full range of medical expenses (as defined currently) but only if they have received an amount of the Net Medical Expenses Tax Offset in the previous income year (or in both 2012-2013 and 2013-2014 in respect to claims in the 2014-2015 income year). 

There is no claim in this category for 2015-2016 and beyond.

The medical expenses must be for:

  • you
  • 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.