The Net Medical Expenses Tax Offset (NMETO) Tax years 2013, 2014, 2015, 2016, 2017, 2018
This is a general outline only and relates mainly to the category B transitional arrangements (that is, wider application to taxpayers and not those eligible for NDIS). It can be a complicated area so this is more of an introduction. The government announced in the 2014 Budget (14 May 2013) that it would phase out the net medical expenses tax offset (NMETO).
The NMETO provides taxpayers with a non-refundable tax offset for eligible out-of-pocket medical expenses (that is, medical expenses less available reimbursements, such as those through the Medicare Benefits Schedule, the Pharmaceutical Benefits Scheme, the Repatriation Pharmaceutical Benefits Scheme, Government aged care subsidies and private health insurance refunds) above the NMETO claim threshold. Eligible medical expenses are defined in section 159P of the ITAA 1936 and generally include an expense related to an illness or operation which has been paid to a legally qualified doctor, nurse, pharmacist or hospital. Other medical expenses relating to dentist, optical and certain referred therapy are also included. The cost of the purchase and maintenance of medical aids and artificial limbs, artificial eyes and hearing aids are also eligible expenses for NMETO. However, expenses incurred as a result of cosmetic operations are ineligible medical expenses.
The amount of offset received is effectively limited by the taxpayer’s tax liability. That is, a taxpayer cannot receive a greater amount of offset than their basic income tax liability. "Use it or lose it".
But they made it even more complicated.
The NMETO provides taxpayers with a non-refundable tax offset for eligible out-of-pocket medical expenses (that is, medical expenses less available reimbursements, such as those through the Medicare Benefits Schedule, the Pharmaceutical Benefits Scheme, the Repatriation Pharmaceutical Benefits Scheme, Government aged care subsidies and private health insurance refunds) above the NMETO claim threshold. Eligible medical expenses are defined in section 159P of the ITAA 1936 and generally include an expense related to an illness or operation which has been paid to a legally qualified doctor, nurse, pharmacist or hospital. Other medical expenses relating to dentist, optical and certain referred therapy are also included. The cost of the purchase and maintenance of medical aids and artificial limbs, artificial eyes and hearing aids are also eligible expenses for NMETO. However, expenses incurred as a result of cosmetic operations are ineligible medical expenses.
The amount of offset received is effectively limited by the taxpayer’s tax liability. That is, a taxpayer cannot receive a greater amount of offset than their basic income tax liability. "Use it or lose it".
But they made it even more complicated.
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From the 2013 tax year, the threshold above which a taxpayer may claim the offset and the rate at which the offset applies was means tested and determined by your adjusted taxable income and family status. The offset in 2013 was 20 per cent of net medical expenses over $2,120 for single taxpayers with adjusted taxable income for rebates of $84,000 or less, and families with a combined adjusted taxable income for rebates of $168,000 or less. For taxpayers with adjusted taxable income for rebates over these income thresholds, the offset was 10 per cent of net medical expenses over $5,000. The thresholds are indexed. As a table for 2013, 2014, 2015 tax years:
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Taxpayers who receive an amount of the NMETO for the 2013 income year will be eligible to claim the full range of medical expenses (as defined currently) for the 2014 income year. Taxpayers who receive an amount of the NMETO for both the 2013 and 2014 income years will then also be eligible to claim the full range of medical expenses (as defined currently) for the 2015 income year.
The sting is the claim must trigger the rebate and you must claim in each year 2013 to claim in 2014 to claim in 2015.
The last year for general claims is 2015. However claims for disability aids will continue until 2019 tax year (Category A)..
This was supposed to be a funding saving to allow the NDIS initiative to be funded. It seems to us that the effect will be push taxpayers into Health Funds to get the miserly return of expenses there and more than likely not the 'savings' not be linked to the NDIS (National Disability Insurance Scheme) which is being rolled out in different ways in different states under different measurement schema..
Source: https://www.comlaw.gov.au/Details/C2014B00009/Explanatory%20Memorandum/Text
Sources for the thresholds and ATO explanations:
2013: https://www.ato.gov.au/Individuals/Tax-Return/2013/Supplementary-tax-return/Tax-offset-questions-T4-T11/T6---Total-net-medical-expenses-2013/
2014: https://www.ato.gov.au/Individuals/Tax-return/2014/Supplementary-tax-return/Tax-offset-questions-T4-T11/T6---Total-net-medical-expenses-2014/
2015: https://www.ato.gov.au/Individuals/Tax-return/2015/Supplementary-tax-return/Tax-offset-questions-T3-T9/T5-Total-net-medical-expenses/
2016: https://www.ato.gov.au/Individuals/Tax-return/2016/Supplementary-tax-return/Tax-offset-questions-T3-T9/T5-Total-net-medical-expenses-for-disability-aids,-attendant-care-or-aged-care-2016/
2017: https://www.ato.gov.au/Individuals/Tax-return/2017/Supplementary-tax-return/Tax-offset-questions-T3-T11/T5-Total-net-medical-expenses-for-disability-aids,-attendant-care-or-aged-care-2017/
2018: https://www.ato.gov.au/Individuals/Tax-return/2018/Supplementary-tax-return/Tax-offset-questions-T3-T11/T5-Total-net-medical-expenses-for-disability-aids,-attendant-care-or-aged-care-2018/
Brett Lamond
9 December 2015
Revised 8 August 2018 to include 2016,2017, 2018 years
[20180808]
Last Edit: 8 August 2018
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The sting is the claim must trigger the rebate and you must claim in each year 2013 to claim in 2014 to claim in 2015.
The last year for general claims is 2015. However claims for disability aids will continue until 2019 tax year (Category A)..
This was supposed to be a funding saving to allow the NDIS initiative to be funded. It seems to us that the effect will be push taxpayers into Health Funds to get the miserly return of expenses there and more than likely not the 'savings' not be linked to the NDIS (National Disability Insurance Scheme) which is being rolled out in different ways in different states under different measurement schema..
Source: https://www.comlaw.gov.au/Details/C2014B00009/Explanatory%20Memorandum/Text
Sources for the thresholds and ATO explanations:
2013: https://www.ato.gov.au/Individuals/Tax-Return/2013/Supplementary-tax-return/Tax-offset-questions-T4-T11/T6---Total-net-medical-expenses-2013/
2014: https://www.ato.gov.au/Individuals/Tax-return/2014/Supplementary-tax-return/Tax-offset-questions-T4-T11/T6---Total-net-medical-expenses-2014/
2015: https://www.ato.gov.au/Individuals/Tax-return/2015/Supplementary-tax-return/Tax-offset-questions-T3-T9/T5-Total-net-medical-expenses/
2016: https://www.ato.gov.au/Individuals/Tax-return/2016/Supplementary-tax-return/Tax-offset-questions-T3-T9/T5-Total-net-medical-expenses-for-disability-aids,-attendant-care-or-aged-care-2016/
2017: https://www.ato.gov.au/Individuals/Tax-return/2017/Supplementary-tax-return/Tax-offset-questions-T3-T11/T5-Total-net-medical-expenses-for-disability-aids,-attendant-care-or-aged-care-2017/
2018: https://www.ato.gov.au/Individuals/Tax-return/2018/Supplementary-tax-return/Tax-offset-questions-T3-T11/T5-Total-net-medical-expenses-for-disability-aids,-attendant-care-or-aged-care-2018/
Brett Lamond
9 December 2015
Revised 8 August 2018 to include 2016,2017, 2018 years
[20180808]
Last Edit: 8 August 2018
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