The medical expenses tax offset will be means tested from 1 July 2012.
The Government announced that, 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 the medical expenses offset will be increased to $5,000 (indexed annually thereafter). In addition, the rate of reimbursement will be reduced to 10% for eligible out-of-pocket expenses incurred. People with income below the surcharge thresholds will be unaffected.
[Thomson Reuters comment: Currently, the medical expenses tax offset or rebate for 2010-11 is 20% of the excess over $2,000. The threshold is indexed annually to the CPI under s 159HA of the ITAA 1936 and for 2011-12 ie from 1 July 2011 is 20% of the excess over $2,060. The rebate threshold was increased from $1,500 to $2,000 in the 2010 Budget and applied from 1 July 2010.
Further tightening of the offset was probably not surprising, although when taken together with other health-related changes such as the income test on the private health insurance rebate (not to mention the increase in private health insurance rates themselves), provides something of a double-hit on those with high medical expenses.
Increasing the threshold was one of those slow moving rather obvious targets for any expenditure review committee, so it’s not surprising it has been raised again.]
Source: Budget Paper No 2 [p 34]; Treasurer’s press release
[WTB 19, 8/5]