Explaining the Net Medical Expenses Tax Offset.

If you can consolidate your medical expenses in a single tax year, you may be able to benefit from the Net Medical Expenses Tax Offset. 

Who can claim?

Net medical expenses are the medical expenses you have paid less any refunds you got, or could get, from Medicare, HIF or another private health insurer. For the 2011/12 financial year you can claim a tax offset of 20% of your net medical expenses over $2,060. There is no upper limit on the amount you can claim.

A statement of your hospital, medical and ancillary claims (including provider fees charged and HIF benefits paid) is included with your annual statement. This will assist you in determining whether your out–of-pocket health expenses are eligible for the Net Medical Expenses Tax Offset.

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 your adopted children, stepchildren, ex-nuptial children and children of your spouse), 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 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 whom you maintained and whose ATI was less than the total of $282 + $28.92 for each week you maintained them, or $1,786 if you maintained them for the whole year
• a child-housekeeper, but only if you can claim a tax offset for them, or 
• an invalid relative, parent or spouse’s parent, but only if you can claim a dependent spouse, parent or invalid relative tax offset for them.

You and your dependants must be Australian residents for tax purposes but you can claim medical expenses paid while travelling overseas.

Please note: the Federal Government will implement means testing for this tax offset in the 2012/13 financial year. So if your annual income is above the Medicare Levy Surcharge thresholds ($84,000 for singles and $168,000 for couples):

• the net medical expenses threshold increases from $2,060 to $5,000; and 
• the tax offset will be reduced from 20% to 10%. 

What can be claimed?

You can claim expenses relating to an illness or operation paid to legally qualified doctors, nurses or chemists and public or private hospitals. 

However, expenses for some cosmetic operations are excluded.

Medical expenses which qualify for the tax offset also include payments:

• 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, and 
• for treatment under an in-vitro fertilisation program.

Find out more about maximising your tax effectiveness.

If you think you could possibly arrange your affairs in such a manner as to maximise your tax effectiveness, we strongly recommend you seek specific advice from your Tax Accountant or the Australian Taxation Office. More detailed information about the Net Medical Expenses Tax Offset is available on the ATO website and you can also use their online net medical tax offset calculator