2013 Tax Mini Series - Medical Expenses
Getting sick may not longer be good tax planning
If you have the misfortune to have significant medical expenses during a tax year, the tax system has come to the rescue to provide you a tax offset (rebate) when you lodge your tax return.
In 2011, you could get the benefit of this offset if your ‘out of pocket’ expenses were more than $2000. In 2012, they indexed the threshold to $2060.
Above those levels, you may have received a rebate calculated at 20% of the ‘out of pocket’ amount.
For 2013, the new threshold is $2120 … unless you are a high income earner.
For ‘high’ income earners, there are two major changes. Firstly, your threshold is set at $5000. Secondly rather than your rebate being calculated at 20% in the dollar, you will get just 10%.
To be a high income earner for these purposes, your income level will need to be:
for singles – $84,000;
for married couples (if married on the last day of the income year) – $168,000;
for families (ie singles or married couples who have one or more dependent children at any time of the income year) – $168,000, increased by $1,500 for every dependent child after the first.
So if you have $5500 of out of pocket medical expenses, and spend hours gong through your medical records for the year and calculate and record the $5500, you will get a rebate of just $50 from the ATO.
For many, this will simply make the rebate ‘too much work’ to get so little, and many will forfeit the rebate. Which is probably the idea.