Medical Expenses Tax Offset (NMETO)
The Net Medical Expenses Offset is being phased out over the period from 1 July 2013 to 30 June 2018.
From 2015-16 (until 2018-19), transitional arrangements only allow claims for disability aids, attendant care or aged care expenses.
- A claim could only be made in 2013-14 if a rebate had been received in 2012-13
- A claim could be made in 2014-15 if a rebate had been received in 2013-14
“received” means that a rebate amount greater than nil had been included in the tax assessment. Sec 159P(1C)
Indexation of the claim thresholds is adjusted after 31 March each year.
NMETO Claim Calculation
The medical expenses tax rebate is calculated as follows:
The offset claim is reserved for resident taxpayers, including a current spouse and (broadly) dependants (see below).
Eligible medical expenses – what’s included
What qualifies as medical expenses is legally defined, but quite wide-ranging. In general it is restricted to payments to legally registered practitioners, for an illness or operation or for medical conditions.
- This includes payments to or for doctors, nurses, chemists, dentists and public and private hospitals. It excludes cosmetic procedures which Medicare doesn’t support, and claims cannot include expense amounts reimbursed under Medicare or health insurance cover.
- See here for Allowable medical expenses
Medical Expenses – Who For?
The medical expenses you can claim are limited to yourself and your spouse, and certain dependent relatives subject to qualifying conditions:
- children under 21 years or student children under 25 years
- child housekeeper
- invalid relatives
=> See Claimable Family
Offset is not refundable
Medical Expense Offsets are not refundable if the amount of the offset is greater than your tax payable.
Medical Expenses Tax Offset rates and Thresholds
|Net Medical Expenses Thresholds|
|Tax Year(s)|| Threshold|
(20% offset rate)
|Means Tested Threshold|
(10% offset rate)
Higher Income Earners – From 1 July 2012 income-tested
From 1 July 2012 the rebate is subject to an income test which is based on the Medicare levy surcharge income minimum thresholds. Higher income earners have a reduced offset rate of 10% and a higher minimum expenses threshold (over $5,000).
The income test is based on Adjusted Taxable Incomes with respect to the Medicare levy surcharge higher income thresholds.
- “Adjusted Taxable Income” is your declared taxable income with certain fringe benefits, exempt income and losses added back – see ATI
|‘Higher Income’ Thresholds|
|2014-15, 2015-16, 2016-17||2013-14||2012-13|
|For families, thresholds increase by $1,500 for each child after the first.|
|Family threshold applies if with a spouse at 30 June, or dependent children at any time during the year|
Change to Adjusted Taxable Income Formula
The government has adjusted the formula for the inclusion of the value of fringe benefits in Adjusted Taxable Income.
The meaning of ‘adjusted fringe benefits total’ is modified so that the gross value rather than adjusted net value (previously 51%) of reportable fringe benefits is used, except for PBIs, hospitals and charities.
‘adjusted fringe benefits total’ is a component of Adjusted Taxable Income
This affects eligibility for:
family tax benefits, stillborn baby payment,child care benefit, Youth Allowance, Abstudy and Isolated Children’s Allowance
parental leave pay and dad and partner pay
net medical expenses offset
dependant (invalid and carer) (DICTO) tax offset
Notional dependent’s offset for the Zone & overseas personnel tax offsets
For details of the amending legislation see Budget Savings (Omnibus) Act 2016 (Schedule 15). The measures received royal assent on 16 September 2016 and according to its terms therefore take effect from 1 January 2017 for family assistance payments and for income tax tests from 1 July 2017.
Medical Expense Offset claim calculation
Subject to entitlement, the procedure for working out a Medical Expense Offset claim is as follows:
- Determine eligible expenditures paid within the tax year
- Ensure all reimbursements are deducted
- Deduct your minimum threshold amount for that tax year – determined by income
- Multiply the result by 20% (or 10% in 2012-13 and later years depending on income)
- The result is your Medical Expenses Tax Offset which is deducted from your tax payable, with any unused amount not refundable.
See ATO Guide to tax offsets
This page was last modified on 28 June 2017