Claiming out-of-pocket medical expenses and other family tax tips


By AMP Financial Planner Dianne Charman*

Tax time is never much fun but it is worth putting in a little extra effort so you can get the biggest refund you’re entitled to.

Medical expenses

This year it’s worth paying extra attention to medical expenses, as the federal government announced in the last budget that it will be phasing out the net medical expenses tax offset (NMETO) from July 2013.

The percentage of net medical expenses that can be claimed this year is determined by adjusted taxable income (ATI) and family status summarised in 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 $2120
above $84,000 10% of net medical expenses over $5000
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 $2120
above $168,000* 10% of net medical expenses over $5000
     * plus $1500 for each dependent child after the first.


Medical expenses that can be claimed include treatments from registered medical practitioners, hospital expenses and nursing home care. The cost of dental and orthodontic treatment (other than solely cosmetic procedures), prescription lenses and contact lenses, laser eye surgery and IVF treatment may also be claimed.

Medical expenses that cannot be claimed include over-the-counter medications, cosmetic surgery, non-prescribed vitamins or health foods, and retirement accommodation.

Under the transitional arrangements during the phasing out period, anyone who is eligible and claims the NMETO for the 2012-13 income year will continue to be eligible for the NMETO in 2013-14. Similarly, those who clam in 2013-14 will be eligible for the NMETO in 2014-15. If you don’t claim what you’re entitled to this year, you won’t be able to claim next financial year unless the medical expenses relate to disability aids, attendant care or aged care.

Family tax

The Education Tax Refund (ETR) was replaced by a new upfront cash payment called the Schoolkids Bonus in 2012, with families no longer having to keep receipts to claim money back at tax time. Eligible families (i.e. those receiving Family Tax Benefit Part A) will automatically receive the bonus twice a year – once at the start of term 1 in January and then again at the start of term 3 in July. Check with Centrelink if you think you’re eligible but have not received the bonus.

Parents with children in childcare should also make sure their information is up to date with Centrelink to ensure they receive the Child Care Rebate. The Child Care Rebate is not means-tested and covers 50 per cent of out-of-pocket expenses for approved childcare, up to a maximum of $7500 per child for the 2012-13 financial year.

Other deductions      

A common deduction that is often overlooked is income protection premiums. If you have income protection held outside superannuation, you can claim the policy premiums as a personal tax deduction.

Any donations over $2 made to approved charitable organisations are also tax-deductable, so don’t forget to claim these.

Speak to your accountant or tax adviser about what work expenses you are entitled to claim. If you travel for work, you may be able to claim a deduction for expenses such as travel fares, meals and accommodation. Some occupations/professions may also be able to claim for the cost of cleaning uniforms or buying protective clothing and footwear.

Anyone who owns an investment property should remember that costs relating to the general maintenance and upkeep of the property can be claimed as a tax deduction. This includes expenses such as lawn mowing and pool maintenance. Management fees can also be claimed and, if you have insurance cover on the property, you can also claim the premium as a tax deduction. Talk to your accountant or tax adviser for more information.

People receiving an inheritance generally do not pay tax on the mere receipt of the inheritance, but if you have reinvested that money, or are gaining an income from it, then tax may apply on this income. Capital Gains Tax (CGT) may also apply if assets such as shares or property are sold.

As tax matters can be quite complicated, it’s a good idea to seek professional advice to ensure you’re not only paying the tax you need to, but also making the most of any deductions or claims you are eligible for.

*Dianne Charman is an authorised representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

Dianne Charman

Dianne Charman is mother, accomplished business woman and Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

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