| Publication: | The Sydney Morning Herald |
|---|---|
| Date: | 27 May 2009 |
| Section: | Money |
Claim any out-of-pocket expenses in excess of $1500.
Tax rebates for private health insurance may be scaled back and the Medicare safety net reined in but the Australian Taxation Office does offer a modicum of financial pain relief for taxpayers with large medical bills.
If your out-of-pocket medical expenses amount to more than $1500 in one financial year, you can claim a partial rebate thanks to the medical expenses tax offset.
"Out-of-pocket" means you must deduct any refunds you receive from Medicare or your private health insurer. You can then claim 20 per cent of your net expenses above the $1500 threshold. This may not sound like much but the good news is there is no upper limit to the amount you can claim and you can include medical expenses for yourself, your spouse and any of your dependants.
Say you spent $10,000 on family medical expenses since July 1 last year, after subtracting refunds. Subtract the $1500 threshold from your net expenses and you are left with $8500 of out-of-pocket expenses. Hence you would be eligible for a rebate amounting to 20 per cent of $8500, that is, $1700.
The average taxpayer is unlikely to be in a position to take advantage of the offset every year but we all have horror years your son falls off his skateboard breaking his arm and several teeth, your daughter needs braces, your partner has cosmetic surgery for skin cancer and you need a knee reconstruction.
You can claim for expenses relating to an illness or operation paid to a doctor, nurse, chemist or hospital. You can also claim for some carer payments and residential aged-care expenses.
While chemist bills can mount up quickly, especially in the winter cold and flu season, you can only claim for items related to a medical condition.
This includes over-the-counter medicine, medical devices, headache pills, cough and cold preparations and the like but not toiletries and other non-medical items. However, you can't claim health-related items such as headache tablets bought at the supermarket or other retail outlets. Non-prescribed vitamins and health foods are also out.
Other eligible claims include dental treatment, optical including glasses and contact lenses, hearing aids, medical aids prescribed by a doctor, most common types of therapy recommended by your doctor and in-vitro fertilisation.
Purely cosmetic procedures are out but cosmetic surgery to counteract the effects of an accident, laser eye surgery to correct vision or reconstructive surgery following an operation (for breast cancer, for example) are eligible for a rebate.
ATO assistant commissioner Deb Rawlings says common mistakes when claiming the rebate include claiming for cosmetic surgery not covered by Medicare, not taking into account refunds received from Medicare or private health funds, claiming for herbal medication, not providing documentation to support claims and not being referred to a specific provider for therapies such as massage, chiropractic and osteopathy.
Even if your annual out-of-pocket medical expenses usually fall short of the $1500 threshold, it's worth keeping all your receipts. If the worst happens and you have a major medical event in June, you can maximise your rebate by including the full year's medical bills.
It also pays to think ahead and buy most of your health-related purchases at one pharmacy.
At the end of the tax year, you simply ask your pharmacist for a printout of all your purchases that year. This will list all your eligible medical expenses, the quantity, price and date of purchase. Similarly, you can ask for an itemised statement from Medicare or your private health insurer to help work out your claim.
Where possible, schedule a series of expensive treatments in one tax year. By spreading the work over two tax years you may find you fall just short of the threshold in both years.
For a list of what you can claim and a medical expenses calculator, go to the Tax Office website at ato.gov.au and search under "medical expenses".
