Private ruling: Net medical expenses tax offset
Published: September 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 213

Ruling: Q1: Do the payments you make to company A qualify as eligible medical expenses for the purposes of the medical expenses tax offset? | A1: Yes. | Q2: Will the payments you are going to make to company B qualify as eligible medical expenses for the purposes of the medical expenses tax offset? | A2: Yes.

Relevant facts and circumstances: You are a resident of Australia for tax purposes. You have a dependant who has been diagnosed with a permanent disability. Your dependant is completely dependent on their caregivers to interpret their needs. They require constant supervision to ensure their safety and to assist with completing activities of daily living. Your dependant has been issue with a 'Companion Card' due to their ongoing need for attendant care support. Your dependant's legally qualified medical practitioner has referred them for treatment under a program. Your dependant is provided with full attendant care services whilst attending this program. Your dependant will start a new program under in the first half of 2015. Your dependant will be provided with an attendant carer under this program. You have out-of-pocket expenses in relation to the fees you pay. You have not received a net medical expenses tax offset in your 2012-13 income tax assessment.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1936 Subsection 159P(1) | Income Tax Assessment Act 1936 Paragraph 159P(1B)(b)

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 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. This tax offset is income tested. The percentage of net medical expenses you can claim and the threshold amount is determined by your adjusted taxable income (ATI) and family status. It should also be noted that the threshold amount is subject to indexation and will change in future income years. The net medical expenses tax offset (NMETO) is being phased out between the 2013-14 and 2018-19 financial years and eligibility for this offset has changed. Transitional arrangements will allow taxpayers to claim the offset from the 2013-14 income year until the end of the 2018-19 income year, but only for those medical expenses relating to disability aids, attendant care or aged care. In addition, for the 2013-14 and 2014-15 income years, taxpayers will be eligible to claim the full range of medical expenses (as defined currently) but only if they have received an amount of the net medical expenses tax offset in the previous income year (or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 income year). In your case you have not received an amount of the NMETO in your 2012-13 income tax assessment so you are limited to claims relating to disability aids, attendant care or aged care only. Attendant care For the 2013-14 to 2018-19 years of income, an amount that would otherwise be paid as medical expenses is treated as not being paid as medical expenses unless the payment relates to services rendered by a person as an attendant of a person with a disability (paragraph 159(1B)(b) of the ITAA 1936). Attendant care services provide assistance with everyday tasks and include, for example, personal assistance, home nursing, home maintenance and domestic services. Your dependant has a disability which requires them to have constant supervision to ensure their safety. Without the provision of an attendant carer your dependant would be unable participate in day-to-day activities. It is considered that fees paid under the program A and program B would fall under payments that relate to services rendered by a person as an attendant of a person with a disability and are an eligible medical expense. Therefore, you are entitled to include your out-of-pocket expenses in relation to these programs in your calculating of your net medical expenses for the purposes of the NMETO.