What does this mean for you?
As part of the 2013-14 Budget the Government announced that it will gradually phase out the Net Medical Expenses Tax Offset (NMETO) with a "use it or lose it" system.
This will mean if you do not claim the NMETO in your 2012-13 tax return, you will not be eligible for the offset in any future year.
If you received the NMETO in your 2012-13 tax return, you will be eligible to receive the offset for all eligible out-of-pocket medical expenses in your 2013-14 tax return. Similarly, those who receive the tax offset in their 2013-14 tax return will continue to be eligible for the offset in 2014-15.
The MNETO will cease for all eligible out-of-pocket medical expenses on 30 June 2015. The changes do not apply to all taxpayers – the offset will continue to apply to eligible out-of-pocket expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019.
There is also a change to the thresholds for singles with a taxable income greater than $84,000 and families with a combined taxable income of over $168,000. Taxpayers under the new thresholds will continue to receive a 20% rebate on expenses over $2,120, and those with a higher income will be limited to a 10% claim on expenses over $5,000.
We recommend that you review your 2013 expenses as even a minor claim slightly over the threshold will keep you eligible for future years NMETO if your situation changes and your expenses increase.
With only a few days left of the financial year it may be worthwhile pre-paying a medical expense such as Orthodontist fees. For some clients the phase out will have little effect whereas for others a small amount of planning on the final days of 2013 could reap benefits in the future.
Please contact our office if you have any questions.