Tax offsets directly reduce the amount of tax you must pay – but they are not the same as tax Deductions.
Deductions only reduce your total assessable income dollar for dollar and your tax payable, at most, by your marginal tax rate.
With offsets, each dollar of tax offset reduces your tax payable by a dollar, regardless of your taxable income.
Net medical expenses tax offset
If you incur medical expenses, you may be eligible to claim the net medical expenses tax offset if you paid for medical expenses relating to disability aids, attendant care or aged care.
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. Generally, this does 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
- 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 recipient within the meaning of the Aged Care Act 1997.
Net medical expenses are your total medical expenses less refunds from Medicare or a private health insurer which you, or someone else, received or are entitled to receive.
The offset is income tested. The percentage of net medical expenses you can claim is determined by your level of income and family status. There is no upper limit to the amount you can claim.
You will no longer be able to claim for net medical expenses tax offset from 1 July 2019.
Contributions paid to a private health fund are not an allowable deduction or a medical expense for tax offset purposes, regardless of whether or not it is a condition of employment.
- Medical expenses – net medical expenses, income thresholds and what you can claim
Private health insurance rebate
The private health insurance rebate and the Medicare levy surcharge have been income tested against three new income thresholds since July 2012. If your income is over a certain amount, these income thresholds may affect the:
- amount of rebate you receive
- rate of Medicare levy surcharge that applies if you do not have an appropriate level of private patient hospital cover and your income is over a certain amount.
We will determine the amount of private health insurance rebate you are entitled to receive when you lodge your tax return – this may result in a refund or a liability for you.