Private ruling: Tax offset - medical expenses - dependant
Published: April 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Is your child considered a dependant for the purposes of the net medical expenses tax offset prior to turning 21year of age? | A1: Yes. | Q2: Is your child considered a dependant for the purposes of the net medical expenses tax offset from their 21 st birthday? | A2: No.

Relevant facts and circumstances: You and your child are Australian residents for tax purposes. You contribute to the maintenance of your child. Your child turned 21 year of age in the relevant financial year. Your child was diagnosed with a condition and has been unable to return to full-time studies. You have paid for medical expense in relation to the treatment of their condition. During the relevant financial year your child was in receipt of the youth allowance.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 159J(6) | Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1936 Subsection 159P(1) | Income Tax Assessment Act 1936 Subsection 159P(4)

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 medical expenses tax offset is a non-refundable offset and 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. Subsection 159P(4) of the ITAA 1936 defines the meaning of dependant and the definition includes: • a child of the taxpayer who is under 21 years of age regardless of their income • a student under 25 years of age whom the taxpayer maintained and whose adjusted taxable income was less than: n the total of $282 plus $21.70 for each week the taxpayer maintained them or n $$1,786 if the taxpayer maintained them for the whole year and • a person for whom the taxpayer can claim a dependent tax offset under section 159J of the ITAA 1936; being n their invalid relative n their parent or n their spouses parent. Subsection 159J(6) of the ITAA 1936 defines (in part) an invalid relative as a person who is not less than 16 years of age who is a child, brother or sister of the taxpayer, or the taxpayer's spouse, who is being paid a disability support pension or a special needs disability support pension. In your situation, it is accepted that you contribute to the maintenance of your child and that you have paid for their medical expenses. However, as your child turned 21 during the relevant financial year and was only in receipt of the youth allowance in this period and not a full-time student they are not considered a dependant for the purposes of the medical expenses tax offset from the day they turned 21. Therefore, you can only include the medical expenses you have paid for your child prior to their 21st birthday in your calculation of the medical expenses tax offset.