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The Phase Out of the Medical Expenses Tax Offset

phase out medical expense tax offsetThe removal of the Medical Expense Offset is something the Government has been able to implement and keep under the public radar resulting in minimal public or political outcry without much outcry from the public.  The Medical Expense Offset has been gradually phased out since 2013, and it will be completely phased out by 2019. This offset referred to the total medical expenses that a taxpayer incurred in a financial year, minus Medicare and private health care refunds.

The phase out of this offset means that for most taxpayers there is no opportunity to claim a Medical Offset in their 2017 tax return. However, eligible expenses in excess of the required threshold related to disability aids, attendant care and aged care can still be claimed in the 2017, 2018 and 2019 tax returns.

Disability Aids

A disability aid is any items that have been designed or recognised to be, an aid that helps to improve the functional capacity of anyone with a disability. Things that are included are wheelchairs, walkers, canes and the maintenance costs of a guide dog. Household or commercial items, such as microwaves or fridges are not included.

The eligible items are solely intended to alleviate the effects of disability and help the disabled person to participate more in society.

Attendant Care

An attendant care expense is any expense incurred in contracting a carer to assist people with disabilities during their everyday living. Expenses could include paying the salary of a personal carer, costs related to home nursing or contracting a gardener or cleaner to look after home maintenance and domestic services.

Aged Care

Aged care expenses are defined as any costs incurred in relation to services and accommodation provided by an approved aged care provider for a person who requires continual care. This is defined in the Aged Care Act 1997 and can include the cost of paying for accommodation and services in an aged care facility.

Income Testing

All of the above deductions are subject to income testing. The percentage you can claim is dependent on your adjusted taxable income (ATI) and family status:

  • Single:
    • ATI of $90,000 or less: you can claim 20% of medical expenses over $2,218
    • ATI of over $90,000: you can claim 10% of medical expenses over $5,233
  • Family:
    • ATI of $180,000 or less: you can claim 20% of medical expenses over $2,218
    • ATI of over $180,000: you can claim 10% of medical expenses over $5,233

Who Can Claim?

To claim any of the above offsets, the expenses must be for:

  • Youself
  • A spouse (spouse’s income will not be taken into account)
  • Your children (adopted, stepchildren, ex-nuptial, children of spouse), if they were under 21 years at the time the expenses were incurred. Children’s incomes will not be tested.
  • Any other children under 21 that you incurred the expense for and whose ATI during the period of care was less than:
  • for the first child under 21 years old
  • the total of $282 plus $28.92 for each week you maintained them, or
  • $1,786 if you maintained them for the whole year
  • for any other child under 21 years old
    • the total of $282 plus $21.70 for each week you maintained them, or
    • $1,410 if you maintained them for the whole year
  • A student under 25 years old, that is engaged in full time study at a school, college or university and whose ATI at the time the expenses were incurred is less than:
    • the total of $282 plus $28.92 for each week you maintained them, or
    • $1,786 if you maintained them for the whole year

If this is all sounding impossibly confusing, or you’re concerned about the effect the phase out rules will have on you and your family contact the friendly team at Online Tax Australia when you are doing your tax return. Our premium service includes a consultancy call with a tax agent to answer any questions including any questions you might have regarding the medical offset rebate.

You can also take advantage of our quick, easy and effective online lodgement system. It’s as easy as answering a series of ‘yes’ or ‘no’ questions and filling in some user-friendly data sheets. Our team of experts will check over your return before it’s sent to the ATO and we’ll make sure you get every cent you’re entitled to.

 

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