Private ruling: Tax offset - medical expenses
Published: November 2012
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 01 July 2009

Ruling: Q1: Can you include personal care service expenses in the calculation of your medical expenses tax offset? | A1: Yes | Q2: Can you include emergency response service expenses in the calculation of your medical expenses tax offset? | A2: No

Relevant facts and circumstances: You live by yourself in your own home. You are legally blind. You require assistance with your personal care which includes bathing, dressing and grooming. You receive assistance from a home care service provider and pay for this on an hourly basis. You subscribe to an emergency response service. As part of the service you are required to make rental payments for an emergency pendant. If you require emergency service you press a button on the pendant worn around your neck which will transmit a signal to the emergency response centre.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 159P | Income Tax Assessment Act 1936 paragraph 159P(4)(f) | Income Tax Assessment Act 1936 paragraph 159P(4)(h)

Reasons for decision: Summary: A medical expenses tax offset is available to a taxpayer under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays 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 a government or public authority or a society, association or fund. The medical expenses tax offset is 20% of the amount by which the net medical expenses exceed the threshold amount for the income year. The term medical expense is defined in paragraph 159P(4)(h) of the ITAA 1936 to include payments made as remuneration of a person for services rendered by them as an attendant of a person who is blind or permanently confined to a bed or an invalid chair. It is not necessary that the payments be made direct to the person performing the services, for example they can be made to an entity employing that person (ATO ID 2002/934). Where however, the payment is made to another entity, the only amount which will qualify for the tax offset is the amount that represents the remuneration (for example wages) of a person for their services as an attendant or carer. Where an entity other than the carer receives the taxpayer's payment and then deducts an amount for its administration costs, those costs are not remuneration of the person for providing services as an attendant or carer and will therefore not qualify as medical expenses. This interpretation has been supported in the Small Taxation Claims Tribunal, in [2001] AATA 944 (Unreported, senior member MD Allen, 15 November 2001). In that case the Tribunal allowed a taxpayer a medical expenses tax offset in respect of expenses paid to a company that provided carers. The rebatable amount only included payments actually made by the company to the carers. The portion of the expenses that was retained by the company for administrative services was not included as part of the rebatable amount. In your case, you pay a home care service provider for the provision of attendants to assist you with your personal care needs. As you are legally blind, the payments for your personal care services are eligible medical expenses. Therefore you can include these amounts in the calculation of your medical expenses tax offset under section 159P of the ITAA 1936. It should be noted that any part of the fee paid to the carer's employer which is an administration fee (or similar) will not be eligible for the medical expenses tax offset. Medical expenses are defined in paragraph 159P(4)(f) of the ITAA 1936 to include payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner. Taxation Ruling TR 93/34 states that a medical or surgical appliance is an instrument, apparatus or device which is manufactured as, or distributed as, or generally recognised to be an aid to the function or capacity of a person with a disability or an illness. For an item to be a medical or surgical appliance, it must assist or improve a person's abilities in performing activities of daily living when they in fact suffer from a disability. This test looks to the character of the appliance, not the purpose for which it is prescribed or used. It is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends. In your case, you subscribe to an emergency response service and as part of the service you are required to make rental payments for an emergency pendant. Although the emergency pendant provides you with quick access to the emergency response centre, it does not overcome any deficit that you suffer in the way you function. Nor does it in any way restore your capacity or ability to perform the activities of daily living. It is merely a communication tool that forms an alternative to a telephone in the event of a medical emergency. The character of the appliance is not one of a medical or surgical nature and accordingly, no part of the payment for the emergency response service qualifies as payment in respect of a medical or surgical appliance for the purpose of paragraph159P(4)(f) of the ITAA 1936. Accordingly, you are not entitled to claim medical expense tax offset for your emergency response service expenses.

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