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.
Medical Expense Tax Refund
Per the budget announcement in May 2012 the rules for claiming the Medical Expense Tax Refund will be income tested,
(and soon to be phased out, see above )
The new rules apply to people with adjusted taxable income above the Medicare levy surcharge thresholds of $84,000 for singles and $168,000 for couples or families in 2012-13. (Your adjusted taxable income includes salary sacrifice, personal superannuation contributions, fringe benefits, net investment losses and child support.)
If your income falls below the Medicare surcharge thresholds you can continue to claim under the old rules, that is, 20 per cent of all your out-of-pocket medical expenses above $2120.
If you earn more than the Medicare surcharge thresholds you can only claim a tax refund equal to 10 per cent of all your net medical expenses over $5000. The $5000 threshold will be indexed annually.
Net medical expenses represents medical expenses, less any related refunds received, or any refunds entitled to be received from Medicare or a private health fund.
In addition, medical expenses paid directly by your employer do not qualify for the tax offset.
Medical expenses, which are eligible for the offset, are:
*Payment to a doctor, nurse or chemist, or a public or private hospital in respect of an illness or
*Payment to dentists for dental services or treatment or the supply, alteration or repair of artificial teeth
*Payments to dental mechanics for the supply, alteration or repair of artificial teeth
*Therapeutic treatment at the direction of a doctor
*The purchase of artificial limbs, eye, or hearing aid
*Medical/surgical appliances prescribed by a doctor
*The testing of eyes, prescription of glasses by a qualified person, or cost of glasses
*Expenses for an attendant to look after a blind person or person permanently confined to a bed or
*An invalid chair and
*Payments for an appropriately trained guide dog for a blind person.
Expenses, which can not be claimed, are:
*Cosmetic operations for which a Medicare benefit is not payable, and
*Dental services and treatment which is solely cosmetic.
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
*A student aged under 25 years whom you maintained and whose separate net income was less than $1,786
*An invalid relative, parent or spouse's parent, but only if you can claim a dependant tax offset.
*There is no requirement that the expenses be paid in Australia or that they be paid to a resident of Australia. This means that where medical expenses are paid during a trip abroad, the expenses may qualify for the tax offset.
However, a taxpayer cannot claim that he or she has paid medical expenses where all that they can show is that they paid weekly maintenance to the former spouse who may have used the money to pay for medical expenses for the children.