Medical Expense Deductibility

The rules regarding medical expenses have changed quite drastically since the 2014 tax year.

Previously, nearly all medical expenses were deductible, either at a rate of 20% for families earning less than $180,000 or $90,000 for singles, or at a rate of 10% for families earning over $180,000 or singles who earned over $90,000, where net medical expenses exceeded $2,218.

Currently the medical expense offset is being phased out where from 2015–16 until 2018–19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care. This offset is also income tested. If you are eligible for the offset, the percentage of net medical expenses you can claim is determined by your adjusted taxable income (ATI) and family status. The table below outlines what can be claimed and at what rate.

From 1 July 2015 net medical expenses not covered in the above categories are longer eligible for any kind of offset.

Disability aids are items of property manufactured as, or generally recognised to be, an aid to the functional capacity of a person with a disability but, generally, will not include ordinary household or commercial appliances.

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

Aged care expenses relate to 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.

Table 1
Family status ATI threshold What can I claim?

(single at 30 June 2015 and no dependent children)

$90,000 or less 20% of net medical expenses over $2,218
above $90,000 10% of net medical expenses over $5,233

(with a spouse at 30 June 2015, or dependent child or children at any time during the year, or both)

$180,000* or less 20% of net medical expenses over $2,218
above $180,000* 10% of net medical expenses over $5,233

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

Net medical expenses are the 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.

For further information contact your financial adviser or tax professional.


Source: Written by Roger Potter, Director of Wybenga & Partners Pty Limited, Chartered Accountants, Sydney