Tax offsets

A tax offset (or rebate) is a concession which reduces tax payable. A number of tax offsets are calculated automatically by the Australian Taxation Office such as:

tax offset for low income earners
mature age worker’s tax offset
Senior Australians Tax offset.
Other tax offsets must be claimed when a tax return is completed. Two common offsets are medical expenses tax offset and tax offset for spouse contributions.

The medical expenses tax offset can be claimed by an individual whose net medical expenses paid exceed $1,500 during the financial year. The offset is calculated as 20% of the amount above the threshold. This tax offset can reduce tax payable to zero but does not reduce Medicare Levy. It is not refundable if it exceeds tax payable.

The medical expenses tax offset is important to all taxpayers who have incurred medical expenses during the year. This concession is of particular interest for residents of aged care facilities (ie hostels and nursing homes). Expenses for aged care, such as basic daily care fees, income tested fees, extra service fees and amounts deducted from accommodation bonds paid as a lump sum, fall within the definition of medical expenses.