Private ruling: Net medical expenses tax offset
Date of advice: 21 November 2016
Published: March 2017
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to claim the net medical expenses tax offset for out-of-pocket expenses incurred for residential aged care expenses for a dependant? | A1: Yes.

Relevant facts and circumstances: Your dependant has been assessed and requires high complex level nursing care. They are a resident of an approved aged care facility. You pay the expenses associated with their caring needs.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Aged Care Act 1997 Further issues for you to consider | You have requested the Commissioner to provide you with a private ruling for future years. Due to the possibility of change to the law, the possibility of changes in your circumstances, and the risk that a subsequently issued public ruling might override a private ruling the Commissioner has issued, the Commissioner has provided a private ruling until the 2017-18 income year. You may request a further ruling after this time if this issue remains a concern to you.

Reasons for decision: Summary: A medical expenses tax offset is available under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays eligible medical expenses in an income year for themselves or a dependant who is an Australian resident. The net medical expenses tax offset is being phased out. From 2015-16 until 2018-19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care. Residential aged care expenses and payments for in-home care must have been made to an approved care provider for personal or nursing care and accommodation in respect of an approved care recipient. An approved care recipient is a person who has been assessed by the aged care assessment team (ACAT) as eligible for residential aged care or in-home aged care. Residential aged care payments can be for: ● daily fees ● income or means tested daily care fees ● extra service fees ● accommodation charges ● periodic payments of accommodation bonds ● amounts drawn from a lump sum accommodation bond, and ● daily accommodation payments. Expenses which do not qualify as aged care medical expenses ● lump sum payments of accommodation bonds or refundable accommodation deposits for residential aged care ● interest derived by care providers from the investment of accommodation bonds or refundable deposits (because these are not payments for residential aged care) ● people who were residents of a hostel before 1 October 1997 and who did not have a personal care subsidy or a respite care subsidy paid on their behalf at the personal care subsidy rate by the Commonwealth (unless they have subsequently been reassessed and approved as a care recipient or continuing care recipient under the Aged Care Act 1997). In your case, you incur residential aged care expenses for a dependant who has been assessed at requiring high complex level nursing care. Therefore you are entitled to claim the net medical expenses tax offset for 20% of your out-of-pocket expenses over $2265.