Don’t Forget About Medical Expenses at Tax Time

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Tax time is in full swing around here with workers eager to get the ball rolling on their tax refunds. One area we’re seeing a lot of taxpayers still need reminding about is the net medical expenses tax offset. Often a few key questions reveals a person would be able to claim this offset and either had never considered it before or had failed to keep track of the household medical costs.

How much can you claim?

This tax offset allows you to claim 20% of your out-of-pocket medical expenses once you reach the $1,500 threshold. That’s 20 cents back for every dollar you spent over $1,500 and it can really add up. You don’t have to have spent the whole $1,500 for yourself either. The threshold can be reached by the combined medical expenses of yourself and all of your dependants who are residents for tax purposes.

What’s a medical expense?

Medical expenses can include things like visits to your doctor, stays in hospital, x-rays, optical, dental, referred physio, prescription medications and even some counselling services.Your tax agent will be able to advise you whether or not a particular expense can be included. You cannot claim for over-the-counter medications or cosmetic procedures, for instance.

Real Example

If you have children or are on regular medications, it’s frightening just how quickly these medical costs can accrue. Being able to recover some of these expenses in the form of a tax offset is well worth the effort.  As I was writing this post I decided to check our own household out-of-pocket medical for last year. We have three children. Between doctors, glasses, dentist and scripts we had $8,353 unreimbursed (this doesn’t include any amount received back from Medicare or private health… the offset works purely off your actual out-of-pocket expenses). Our tax offset on this amount was a lovely $1,370. That’s calculated as [8,353 - 1,500] x 20%. As offsets directly reduce tax liabilty, this was a tax saving of over $1,300 right there!

How do I get the information I need?

If you are using the services of a registered tax agent, they are able to obtain details of any medical claims processed through Medicare (this will also be available to self-preparers using the ATO’s etax) to determine your gaps for the financial year. If you tend to use the same pharmacy for your prescriptions, you can pop in and ask them for a print out of your script purchases for the tax year. Most chemists are used to this around tax time and willing to oblige.

Start tracking those medical expenses NOW in preparation for next year!  

Tagged as: medicare, tax, tax offset, Taxation

Article by Christie Lewis

Christie is Practice Manager at Alan Lewis Accountants . Besides accounting, her passion is for all things small business (and blogging, of course). You can contact Christie directly at christie@lewistaxation.com.au.

Christie has written 811 awesome articles for us at Alan Lewis Accountants – BLOG

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