Changes to tax offsets

Consolidation of Dependency Tax Offsets

The Government will remove barriers to participation by consolidating eight existing dependency tax offsets into a single, non-refundable offset from 1 July 2012 for those maintaining a dependent that is genuinely unable to work due to disability or carer responsibilities. This offset will leave taxpayers with dependants who are genuinely unable to work no worse off and, in many cases, better off.

Phasing out the Mature Age Workers Tax Offset

The Government will be investing in better targeted participation programs and improve value for money through phasing out the mature age worker tax offset (MAWTO). The Government will be maintaining the MAWTO for people who are 55 or older on 1 July 2012, as they may have built the MAWTO into their household budgets.

From 1 July 2012, the Government will phase out the mature age worker tax offset (MAWTO) for taxpayers born on or after 1 July 1957. This will not affect any person who currently receives MAWTO.

The Government has already moved to put in place better measures to boost the employment prospects of older Australians who want to stay attached to the workforce. To help those older Australians who wish to continue work, but face barriers to getting a job, the Government will provide a Jobs Bonus (cash incentive) of $1,000 to employers who recruit and retain a worker aged 50 years or over for over three months.

Reforming the Net Medical Expense Tax Offset

A 20 per cent tax offset is available in respect of net medical expenses costing over $2,060.

“Net medical expenses” is the difference between medical expenses incurred relating to you or your dependants, less any refund you may have already received from Medicare or a private health insurance provider. Certain medical expenses are either excluded, such as cosmetic surgery, or require a doctor to direct that an individual receive therapeutic treatment, such as physiotherapy.

From 1 July 2012, the Government will introduce a means test for the Net Medical Expense Tax Offset, preserving the benefit for those under the Medicare Levy Surcharge (MLS) threshold, and reducing the rate and threshold for those over the MLS threshold.

For those people with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples/families in 2012-13), the claim threshold will be increased to $5,000 and the rate of reimbursement reduced to 10 per cent in the 2012-13 tax year. Taxpayers with income below the MLS threshold will continue to receive the same assistance as currently.