Private ruling: Net medical expenses tax offset
Published: December 2014
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2011

Ruling: Q1: Do the monthly payments you make to an aged care provider qualify as an eligible medical expense for the purposes of the medical expenses tax offset? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident for income tax purposes. Several years ago you were assessed by the Aged Care Assessment Team (ACAT). You were approved as eligible to receive permanent residential care at a low level. You have been a resident of an aged care facility that is approved under the Aged Care Act 1997 (the Act) for several years. You have recently been assessed as having 'high care needs' under an Aged Care Funding Instrument (ACFI). You have provided a copy of your annual tax Invoice/Statement. Your invoice lists payment made for daily fees. The daily fee is made up of amounts for standard daily fee and income tested fee.

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)(c) | 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 now depends on your level of income as the rebate is now income tested. This not only affects the threshold amount but also the percentage of the rebate you can claim. It should also be noted that the threshold amount is subject to indexation and will change in future income years. In order to claim the offset in the 2011-12 to 2011-13 years of income, the expenditure must fall within the definition of 'medical expenses' as contained in subsection 159P(4) of the ITAA 1936. Paragraph (a) of the definition of 'medical expenses' under subsection 159P(4) of the ITAA 1936 includes payments made to a public or private hospital in respect of an illness or operation. The term 'hospital' is not defined for the purposes of section 159P of the ITAA 1936. It therefore has its ordinary meaning. The Macquarie Dictionary defines 'hospital' as 'an institution in which sick or injured persons are given medical or surgical treatment'. It is accepted that the nature of care provided to a low level or high level care recipient may be characterised as being in relation to an 'illness' because such care is necessarily provided to someone whose condition is not that of a healthy state. It is considered that the aged care facility qualifies as a hospital for the purposes of subsection 159P(4) if the ITAA 1936 as they provide accommodation and approved personal care services to you . 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 care provided by an approved provider (within the meaning of the Aged Care Act 1997 ) of a person who: (i) is approved as a care recipient under the Act; or (ii) is a continuing care recipient within the meaning of that Act. (Paragraph 159P(1B)(c) of the ITAA 1936) In your case, you were originally assessed by an ACAT team as requiring low level care. You have resided in an approved aged care facility for a period of time and you have recently been assessed as requiring high level care under an ACFI. It is accepted that the aged care facility is an approved care provider and that you are an approved care recipient under the Act and therefore the monthly payment you make are considered to be eligible medical expenses for the purposes of the medical expenses tax offset and you are entitled to include these payments in your calculation of the medical expenses tax offset.