Private ruling: Medical expenses tax offset
Published: August 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Can the expenses associated with your surgery be included when calculating your eligibility for a medical expenses tax offset? | A1: Yes.

Relevant facts and circumstances: You incurred costs for non cosmetic surgical treatment. The treatment was not covered by your private health insurance.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P, | Income Tax Assessment Act 1936 Section 159P and | Income Tax Assessment Act 1936 paragraph 159P(4)(a).

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, to the extent that they are not reimbursed, or are eligible to be reimbursed, from Medicare and private health insurers. The medical expenses tax offset is only available if the amount of medical expenses, after being reduced by any entitlement to reimbursement from a health fund or government authority such as Medicare, exceeds the threshold amount. The amount of net medical expenses tax offset you can claim will now depend on your level of income. You will only be able to claim an offset of 10% of your net medical expenses over $5,000 if you have an adjusted taxable income (ATI) above: · $84,000 if you are single, or · $168,000 if you are a couple or family. The family threshold will increase by $1,500 for each dependent child after the first. If your ATI is below these income thresholds, you are not affected by this change and can continue to claim an offset of 20% of your net medical expenses over the indexed threshold amount. For the 2013 income year the threshold amount is $2,120. Medical expenses are defined in subsection 159P(4) of the ITAA 1936. Paragraph (a) of the definition includes payments made to a legally qualified medical practitioner in respect of an illness or operation. The term 'illness' is not defined in the ITAA 1936 and therefore it is necessary to look at the ordinary meaning of the term. An illness includes a sickness, disease, or disorder of the body or the mind and involves a deviation from the normal healthy state. An 'illness' would include the surgical work you had undertaken. The term 'operation' is not defined in the ITAA 1936 and therefore it is again necessary to look at the ordinary meaning of the term. An 'operation' in a medical sense means an act or series of acts performed on the body of a patient for their relief or to restore them to a normal condition. It involves the use of surgical instruments as distinguished from therapeutic treatment. You have a disorder of the body which qualifies as an illness. Your surgery is accepted as being an operation performed in order to correct or improve your condition. Therefore you are entitled to include the costs for the surgery costs in the calculation for the medical expenses tax offset.