News

Phasing out the Net Medical Expenses Tax Offset

If you were ineligible to claim the Net Medical Expenses Tax Offset (NMETO) in the 2012/13 financial year, say goodbye to claiming it this year or in future.

The Net Medical Expenses Tax Offset (NMETO) allows individual taxpayers with an out of pocket expense greater than a certain threshold to claim a non-refundable tax offset.  Historically this was 20c for every $1 spent in excess of Medicare or Private Health Insurance refunds on medical expenses and ancillary costs of diagnosed medical conditions.

For the 2012/13 financial year, the offset became means tested.  You could claim a tax offset if your net medical expenses were over $2,120. The percentage of net medical expenses you can claim is determined by your adjusted taxable income (ATI) and family status.  See table below:

Family Status

 

ATI Threshold

What You Can Claim

SINGLE

(single at 30 June 2013 and no independent children)

$84,000 or less

$84,001 or more

20% of net medical expenses over $2,120

10% of net medical expenses over $5,000

FAMILY

(with a spouse at 30 June 2013, or dependent children at any time during the year, or both)

$168,000 or less

$168,001 or more

20% of net medical expenses over $2,120

10% of net medical expenses over $5,000

*plus $1,500 for each dependent child after the first

On 14 May 2013, the government announced in the 2013-14 Budget that it will phase out the net medical expenses tax offset, on the argument that "the NMETO predates universal health care and it is appropriate to phase it out as DisabilityCare Australia is implemented and once aged care reforms have been in place for several years."

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.