Medical expenses tax offset to disappear


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Those who hoped the Abbott government would cancel Labor's proposed phasing out of the medical expenses tax offset have been disappointed, with draft legislation to implement the proposal being released just before Christmas.

Until recently everyone was eligible for a tax offset (or rebate) equal to 20% of the net medical expenses in excess of $2120 that were incurred by a taxpayer and his or her family in the financial year. In 2012 to 2013 a new means test took effect.

As a result the 20% offset was restricted to single taxpayers with an adjusted taxable income of $84,000 or less and to couples whose combined income is no more than $168,000. Those earning more get only a 10% tax offset for every dollar spent in excess of $5000.


The new phase out arrangements, which have two parts, took effect from July 2013. The first part stipulates that only those who received some medical expenses offset in 2012 to 2013 are eligible for the offset in 2013 to 2014, with only those who get some offset in 2013 to 2014 being eligible in 2014 to15. After this the full offset will cease to be available to anyone.

The second part of the phase out stipulates that, in the case of medical expenses relating to disability aids, attendant care and aged care, the offset will continue until 2018 to 2019.

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Peter Freeman is a former managing editor of The Australian Financial Review. He runs his own self-managed super fund.

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