Private ruling: Medical Expenses Tax Offset
Published: July 2012
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to include dental expenses in your calculation of a medical expenses tax offset? | A1: Yes

Relevant facts and circumstances: You are an Australian resident. You suffer from a medical condition and it has been recommended by your surgeon that you undertake medical treatment. You are considering undertaking the treatment from a legally qualified medical practitioner or dentist in Australia or overseas. You have provided information from your surgeon of the medical condition. The purpose of the treatment is not cosmetic.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P.

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. The medical expenses tax offset is means tested from 1 July 2012. Where your adjusted taxable income is above the Medicare Levy Surcharge (MLS) thresholds ($84,000 for singles and $168,000 for couples or families in 2012-13) you may claim a tax offset of 10 per cent for eligible out of pocket expenses in excess of $5,000. Where your adjusted taxable income is below that of the MLS threshold you may claim a tax offset of 20% for the net medical expenses over $2,120 for the 2012-13 income year. Medical expenses are defined in subsection 159P(4) of the ITAA 1936. Paragraph (b) of the definition includes payments made to a legally qualified dentist or dental services or treatment or the supply alteration or repair of artificial teeth. However, if the dental service or treatment is solely cosmetic the expense becomes an ineligible medical expense. 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 where the treatment has been carried out by a legally qualified medical practitioner or legally qualified dentist. 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. In your case you have a medical condition which qualifies as an illness. The surgery is accepted as being an operation performed in order to correct or improve the disorder. The net expenses in relation to the surgery qualify as 'medical expenses' for the purpose of the medical expenses tax offset under section 159P(4) of the ITAA 1936 if the work is performed by a legally qualified dentist or doctor.

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