$7 MEDICAL CO-PAYMENT OR TAX DEDUCTION?

Lan Nguyen, Chartered Accountant

 

Let’s talk about the controversial $7 medical co-payment. Firstly you’ll receive $5 less from Medicare and then pay another $2 to the doctor. This proposed legislation has not been passed so it’s not yet law. The debate around the co-payment raises many discussions but it hasn’t openly discussed how the costs of medical services and pharmaceuticals can be claimed on tax northat, as of March 2014 the ATO is phasing this out.

Net Medical Expenses (NME) (ie. The difference between what you pay and refunds you received, or could receive, from Medicare or a private health insurer) do accumulate and the ATO has a means test for claiming this as a tax offset (NMETO). For people with adjusted taxable income above the Medicare Levy Surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012-13), the threshold above which a taxpayer may claim NMETO is $5,000 and the rate of reimbursement will be reduced to 10% for eligible out-of-pocket expenses incurred.

 

You and your dependants must be Australian residents for tax purposes, but you can claim medical expenses paid while travelling overseas. There is no upper limit to the amount you can claim but it is changing. Now is the time to seek professional advice on how to manage your medical tax offset for the next few years.

 

Have a look through this list there are many costs you could claim

 

• Nursing homes or hostels
• Healing and curing therapy
• Reconstructive surgery
• Dental
• Therapeutic treatment like physiotherapist or speech therapist
• Artificial limbs, eyes and hearing aids medical aids – purchase and repair
• Optometry tests and spectacles – purchase and repair
• Blindness, disability
• Pharmaceuticals
• Nursing homes or hostels

Claim limits are best explained with the table below:

Family status	ATI threshold	What can I claim?
Single(single at June 30, 2013 and no dependent children)	$84,000 or less	20% of net medical expenses over $2,120
	above $84,000	10% of net medical expenses over $5,000
Family(with a spouse at June 30, 2013, or dependent children at any time during the year, or both)	$168,000* or less	20% of net medical expenses over $2,120
	above $168,000*	10% of net medical expenses over $5,000

* plus $1,500 for each dependent child after the first.
The key to claiming any offsets is to follow these rules

1) Make sure it is covered by Medicare

2) Performed by a legally qualified medical practitioner.

3) Your GP gave you a specific referral

4) You have kept clear records of costs, expenses and refunds.

5) Medicines are listed as pharmaceutical goods

So, if the $7 co-payment IS legislated; keep your receipts and claim it on your tax!

Written by Lan Nguyen, Chartered Accountant and Wealth Adviser from Success Accounting Group.

Lan Nguyen is a Chartered Accountant with over 15 years experience in helping small businesses grow and build wealth. She is the founder of Success Accounting group located in Mentone and Springvale South, Victoria. A forward thinking chartered accountants practice providing accounting & tax solutions for small business, Xero Training, income tax preparation and business start up advice and setup. Lan and her team of Success Accountants are passionate about inspiring and educating their clients on their journey of building their business and growing their wealth. They do so through online training videos, blogs, business and wealth growth tips.

 

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