Private ruling: Medical expenses tax offset
Date of advice: 10 September 2014
Published: September 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Do your complementary medicines and nutritional supplements purchased from outlets other than a pharmacy qualify as eligible medical expenses for the purpose of the net medical expense tax offset? | A1: Yes.

Relevant facts and circumstances: You and your dependant are Australian residents for tax purposes. Your dependant suffers from a condition which requires regular monitoring by their legally qualified medical practitioners. As part of your dependant’s treatment plan, they are required to take complementary medicines and nutritional supplements These are prescribed and overseen by your dependant’s legally qualified medical practitioners. The complementary medicines and nutritional supplements have been purchased from outlets other than a pharmacy. You have out-of-pocket costs relating to your dependants treatment. You received a net medical expense 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 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. 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 received an amount of the NMETO in your 2012-13 income tax assessment, therefore you are entitled to make a NMETO claim in the 2013-14 financial year for the entire range of medical expenses that are eligible under section 159P, not just those for disability aids, attendant care or aged care. Based on your circumstances, paragraph 159P(4)(d) of the definition of ‘medical expenses’ of the ITAA 1936 would be the only provision where your expense can be considered to qualify as an medical expense. This paragraph provides for payments made for therapeutic treatment administered by direction of a legally qualified medical practitioner. The general concept of therapeutic treatment is concerned with healing or curing, rather than preventing the need for therapy. Therapeutic treatment involves the exercise of professional skill in the medical field in a way which normally involves the person administering the treatment using drugs or physical or mental processes of one kind or another for the purpose of curing or managing the disease or ailment. For treatment to be regarded as being administered by direction of a legally qualified medical practitioner, the treatment needs to be advised, prescribed or ordered by a legally qualified medical practitioner. It also requires monitoring to some extent by the medical practitioner. In your case, your dependant is undergoing a treatment for a condition that is administered under the direction of their legally qualified medical practitioners. Part of their treatment involves the use of prescribed complementary medicines and nutritional supplementation which is considered therapeutic treatment. The fact that some of these items have been purchased from outlets other than a chemist or pharmacy does not affect the fact that they are considered to be an eligible medical expense for the purposes of the net medical expenses tax offset. Accordingly, you are entitled to include the net costs in your calculation of the medical expenses tax offset.