Private ruling: Overseas medical expenses
Published: August 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Do the net costs associated with your dependant being hospitalised whist overseas and the medications purchased through a chemist/pharmacy qualify as eligible medical expenses for the purposes of the medical expenses tax offset? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You paid for medical expenses in relation to a dependant who was also an Australian resident for taxation purposes. Your dependant was diagnosed with a medical condition. Whilst overseas, your dependant become ill and was admitted to hospital for treatment. You paid for the hospital costs and medication purchased from a chemist/pharmacy.

Relevant legislative provisions: 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 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 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 relevant threshold amount. For the 2012-13 financial year the threshold amount is $2,120. Please note that the threshold amount is subject to indexation and will change in future income years. Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the medical expenses tax offset. Paragraph (a) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation. However, it is not necessary that the payments be made to a resident of Australia or that they are paid in Australia. Therefore, medical expenses paid during an overseas trip may qualify for the tax offset. In your case, you paid for medical expenses in relation to your dependant's treatment whilst travelling overseas. The amounts you have paid to the hospitals and any medications purchased through a chemist/pharmacy are considered to be eligible medical expenses for medical expenses tax offset purposes. Accordingly, you are entitled to include the net costs in the calculation of the medical expenses tax offset.