Medical Expenses Tax Offset

medical expenses tax offset online tax return

Eligibility to claim a Medical Expense Offset can be confusing. Recent Government changes to legislation have resulted in fewer taxpayers being eligible for the medical expense rebate.

To find if you are eligible to claim the Medical Expense Offset please refer to the notes below or contact Online Tax Australia for advice.

2016 Onwards: Medical Expenses Offset

Phasing Out of Net Medical Expense Offset

In 2013, the Government announced a program to phase out the Net Medical Expense Offset.  The phasing out program would take place between 2013 and 2019.

The phasing out program has worked to progressively tighten the eligibility requirements and conditions required to receive a Medical Expense Offset during the 2014 and 2015 years. This has resulted in a significant reduction in the number of Medical Offset claims in those years. For most taxpayers, the phasing out program removes any entitlement to claim a Net Medical Offset in their 2016 tax return.

From 2015–16 until 2018–19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care.

Net expenses are your total eligible medical expenses minus refunds from Medicare, National Disability Insurance Scheme (NDIS) and private health insurers, which you or someone else, received or are entitled to receive.

Eligible Medical Offset Claims in 2016 to 2019

The only eligible medical expenses that can be claimed under the Net Medical Expenses Offset in 2016 must relate to disability aids, attendant care or aged care.

Disability aids are defined as items manufactured as, or generally recognised to be, an aid to the functional capacity of a person with a disability. Generally, this does not include ordinary household or commercial appliances. For example, the purchase of a wheelchair or the maintenance of a guide dog are disability aids—they help a person’s daily living activities, provide assistance to alleviate the effect of the disability and enable increased participation in society.

Attendant care expenses relate to services and care provided to a person with a disability to assist with everyday living. For example, the provision of personal assistance, home nursing, home maintenance, and domestic services.

Aged care expenses include 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.

Net medical expenses are your total medical expenses, less refunds from Medicare and private health insurers which you, or someone else, received or are entitled to receive. They do not include contributions to a private health insurer, travel or accommodation expenses associated with medical treatment, or inoculations for overseas travel.

This tax offset is income tested. The percentage of net medical expenses you can claim is determined by your adjusted taxable income (ATI) and family status, as per the table below.

medical offset

Source: ATO Website

You can use this to determine whether you are eligible to claim this tax offset. If you are entitled to make a claim, Online Tax Australia will calculate your tax offset for you using the information you provide in your tax return.

How Is A ‘Disability’ Defined?

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. For example:

  • 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.

Residential 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 cover:

  • 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, and
  • Daily accommodation payments.

Pre-2016: Medical Expenses Offset

There are a number of quite specific rules that govern the medical expenses tax offset process.

Medical Expense Tax Offset Thresholds

  • A single person with a taxable income of less than $88,000 can claim 20% of net medical expenses over $2,162
  • A single person with a taxable income over $88,000 can claim 10% of net medical expenses over $5,100
  • A family with an adjustable a income of $176,000 or less can claim 20% of net medical expenses over $2,162
  • A family with an taxable income over $176,000 can claim 10% of net medical expenses over $5,100
  • The claimed medical expenses must be for:
    • You
    • Your spouse, regardless of their income
    • Your children who were under 21 years old, including adopted and stepchildren, regardless of their income
    • Any other child under 21 years old who was not a student, whom you maintained, and whose adjusted taxable income (ATI) for the period you maintained them was less than
    • For the firstchild under 21 years old
    • A housekeeper, but only if you can claim an amount for them as part of your zone or overseas forces tax offset
    • An invalid relative, parent or spouse’s parent, but only if you can claim for them as part of your zone or overseas forces tax offset

What You Can Claim as Medical Expenses

There are a variety of payments that can be claimed as a medical expense, including payments for:

  • Qualified medical practitioners, nurses or chemists
  • Dentists or orthodontists
  • Opticians or optometrists
  • A carer who looks after a person who is blind or confined to a bed or wheelchair
  • Therapeutic treatment
  • Medical aids
  • Artificial limbs or eyes, and hearing aids
  • Maintaining a guide dog
  • Laser eye surgery
  • IVF treatment
  • Residential aged care expenses
  • Nursing homes, hostels or respite care,

What You Cannot Claim as Medical Expenses 

  • Payments for cosmetic operations for which a Medicare benefit is not payable
  • Payments for dental services or treatment that are solely cosmetic
  • Payments for 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

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Contact Online Tax Australia for All Your Medical Expense Claims

If you’ve been searching for an experienced, professionally qualified, transparent accountant that understands all the ins and outs of medical expenses tax offsets, then contact the friendly team at Online Tax Australia today: