How to Claim Tax From Out of Pocket Medical Expenses

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The net medical expenses tax offset is no longer be available from 1 July 2019.

From the 2014-15 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.

If your claim meets the new, restricted criteria, you may be entitled to claim a tax offset in the current financial year.

How to calculate your out of pocket medical expenses

For the final year of this offset (2018-19), 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 $90,000 for singles or $180,000 for a couple or family will be affected. The family threshold increases by $1,500 for each dependent child after the first.

If your adjusted taxable income is above these thresholds, you can claim a reimbursement of 10% for qualifying net medical expenses incurred in excess of $5,609 (indexed annually).

Taxpayers with an adjusted taxable income below these thresholds can claim a reimbursement of 20% for qualifying net medical expenses over $2,377 (indexed annually) when they lodge their tax return.

What can I claim for?

Disability aids are items of property manufactured as, or generally recognised to be, an aid to the functional capacity of a person with a disability but, generally, will not include ordinary household or commercial appliances.

Attendant care expenses relate to services and care provided to a person with certain disabilities to assist with everyday living, such as the provision of personal assistance, home nursing, home maintenance, and domestic services to a person who is blind or permanently confined to bed or a wheelchair.

Aged care expenses relate to services and accommodation provided by an approved aged care provider to a person who is a care recipient or continuing care recipient within the meaning of the Aged Care Act 1997.

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
  • an invalid or invalid carer if they meet the criteria listed at item T6 and, you claimed in relation to them or could have claimed for them at item T6 had your ATI or the combined ATI of you and your spouse not exceeded $100,000.

Eligible expenses include payments:

  • to a carer who looks after a person who is blind or permanently confined to a bed or wheelchair
  • for disability 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 residential or in-home aged care expenses.

Residential aged care expenses and payments for in-home care must have been made to an approved care provider for personal or nursing care and accommodation in respect of an approved care recipient.

An approved care recipient is a person who has been assessed by the aged care assessment team (ACAT) as eligible for residential aged care or in-home aged care.

Residential aged care payments can be for:

  • daily fees
  • income or means tested daily care fees
  • extra service fees
  • accommodation charges
  • periodic payments of accommodation bonds
  • amounts drawn from a lump sum accommodation bond
  • daily accommodation payments.

Expenses which do not qualify as aged care medical expenses:

  • lump sum payments of accommodation bonds or refundable accommodation deposits for residential aged care
  • interest derived by care providers from the investment of accommodation bonds or refundable deposits (because these are not payments for residential aged care) people who were residents of a hostel before 1 October 1997 and who did not have a
  • personal care subsidy or a respite care subsidy paid on their behalf at the personal care subsidy rate by the Commonwealth (unless they have subsequently been reassessed and approved as a care recipient or continuing care recipient under the Aged Care Act 1997).

A disability aid for the purpose of this offset is an instrument, apparatus or device generally recognised to be an aid to the function or capacity of a person with a disability. A disability aid will improve a person's quality of life.

The purchase of a wheelchair or the maintenance of a guide dog are examples of disability aids as they help a person’s daily living activities, provide assistance to alleviate the effect of the disability and enable increased participation in society.

A disability is defined as a restriction or impairment which has lasted or is likely to last, for a period of six months or more, and which restrict a person's every day activities. Such as:

  • loss of sight (not corrected by glasses or contact lenses)
  • loss of hearing where communication is restricted, or an aid to assist with, or substitute for, hearing is used
  • speech difficulties
  • chronic or recurrent pain or discomfort causing restriction
  • shortness of breath or breathing difficulties causing restriction
  • blackout, fits or loss of consciousness
  • difficulty learning or understanding
  • incomplete use of arms or fingers
  • incomplete use of feet or legs
  • nervous or emotional condition causing restriction
  • restriction in physical activities or in doing physical work
  • disfigurement or deformity
  • mental illness or condition requiring help or supervision
  • long-term effects of head injury, stroke or other brain damage causing restriction
  • receiving treatment or medication for any other long-term condition or ailment, and still restricted
  • any other long-term condition resulting in a restriction.

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, National Disability Insurance Scheme (NDIS) or a private health insurer.

This information sheet is intended as a guide for H&R Block clients. All actual detail and circumstances differ, please discuss your situation with a H&R Block Tax Consultant. Use one of our Taxsaver envelopes to keep all your receipts and documents for the year. Remember – if you are not sure if you can claim an expense, keep the receipt and we will ensure that we claim all allowable deductions and rebates for you whilst preparing your tax return. H&R Block is Australia’s largest network of tax accountants with over 470 offices. Every year we help thousands of Australians achieve a better taxation result. For your nearest office call 13 23 25.

September 2019

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