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Reminder - changes to the private health rebate and medical expense off-set 

There have been major changes in recent times to the Private Health Insurance Rebate and the tax offset available for out of pocket medical expenses.  These changes may have a significant impact when completing your 2013 income tax return.

Private Health Insurance Rebate

The Private Health Insurance Rebate is an amount that the Government contributes towards the cost of your private health insurance premiums.  In many cases the rebate is claimed as a reduction in the amount of premiums paid to your private health insurer. Alternatively, the rebate can be claimed at year end in your tax return.

Significant changes were announced in the 2012-2013 Federal Budget to income test the eligibility for this rebate from 1 July 2012.  The level of rebate is now based on your combined family income.  It is important to ensure your private health provider is aware of the rebate level your family is eligible to receive, or you may have an unexpected tax bill at the end of the year.

A summary of the 2012/2013 income thresholds and private health rebates are:

Income Threshold

Singles

$84,000 or less

$84,001 – 97,000

$97,001 –130,000

$130,001 or more

Families *

$168,000 or less

$168,001 – 194,000

$194,001 – 260,000

$260,001 or more

Private Health Insurance Rebate Entitlement

Under 65 years old

30%

20%

10%

0%

65–69 years old

35%

25%

15%

0%

70 years old or over

40%

30%

20%

0%

* The family income threshold is increased by $1,500 for each dependent child after the first.

If you are not sure whether you are receiving the correct level of rebate on your premiums, we recommend you contact your private health insurance provider.

Net Medical Expenses Tax Offset (NMETO)

The Government announced in the 2012-2013 Federal Budget, that it would apply an income test to the net medical expenses tax offset and reduce the rate available.  Net medical expenses include costs paid to a legally qualified doctor, nurse, chemist or hospital.  It can also include therapeutic expenses such as physiotherapy if carried out under the direction of a doctor.

The rates for the 2012-2013 income year are as follows:

Family status

ATI** threshold

What can I claim?

Singles

$84,000 or less

20% of net medical expenses over $2,120

above $84,000

10% of net medical expenses over $5,000

Families

$168,000* or less

20% of net medical expenses over $2,120

above $168,000*

10% of net medical expenses over $5,000

* plus $1,500 for each dependent child after the first. **adjusted taxable income.

Recent Developments

In the recent 2013-2014 Federal Budget, it was announced that the NMETO will be phased out from 1 July 2013.  The transitional rules will be on a "use it or lose it" basis, so if you are eligible to claim in the 2013 you will continue to be eligible to claim in the 2014 year.  We note these proposed changes were not passed as legislation before the Federal Election was called.

This article was published in the Spring 2013 Horizon. For a pdf version of the newsletter please click here.