Private ruling: Medical expenses tax offset
Published: February 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Do your payments to a care provider qualify for inclusion in the calculation of a medical expenses tax offset for the 2014-15 financial year? | A1: Yes. | Q2: Do your payments to a chemist qualify for inclusion in the calculation of a medical expenses tax offset for the 2014-15 financial year? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 159P

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 you pay certain medical expenses in an income year for yourself or a dependant who is an Australian resident, to the extent that you are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund. Under recent changes to the legislation, the medical expenses tax offset is being phased out. To be eligible to claim this offset in 2014-15, you must have either: • received this offset in both your 2012-13 and 2013-14 income tax assessments, or • paid for medical expenses relating to disability aids (for example, a walking frame), attendant care or aged care. If you received the medical expenses tax offset in both your 2012-13 and 2013-14 income tax assessments, there is no change to the types of net medical expenses that you can claim for 2014-15. However, if you did not receive this offset in both your 2012-13 and 2013-14 income tax assessments, you can only claim net medical expenses relating to disability aids, attendant care or aged care. | Detailed Reasoning - Application to your circumstances: You did not receive a medical expenses tax offset in your 2012-13 income tax assessment. Consequently, for 2014-15 you can only claim net medical expenses relating to disability aids, attendant care or aged care. As the payments you make to a chemist do not relate to a disability aid (such as a walking frame), attendant care or aged care, these payments cannot be included in your medical expenses tax offset calculation. We acknowledge that these payments to a chemist are medical expenses, but due to the changes to phase out the medical expenses tax offset, these payments no longer qualify for inclusion in the offset in your circumstances. You are also making payments to entity A for attendant care. The term 'medical expenses' is defined in subsection 159P(4) of the ITAA 1936. Paragraph (h) of the definition include payments as remuneration of a person for services rendered as an attendant of a specific person. The payments you make to entity A are medical expenses relating to attendant care and therefore can be included in the calculation of a medical expenses tax offset for 2014-15. Where your adjusted taxable income is less than $90,000, the amount of the tax offset is calculated as 20% of the excess of net medical expenses over the relevant threshold. For the 2013-14 financial year, the threshold was $2,162. This threshold is indexed annually. The indexed threshold for the 2014-15 will be announced after 31 March 2015. You will be entitled to a medical expenses tax offset for the 2014-15 financial year in relation to your payments to entity A as • these are eligible medical expenses, and • these net medical expenses will be above the relevant threshold.

Relevant facts: You were accepted by Centrelink as eligible for a specific type of aged pension based on medical confirmation. | After the loss you had to seek assistance. | You were referred for an assessment. | A home care package with entity A was negotiated and commenced. Your package includes personal care assistance, nursing and relevant allied health services. | You pay entity A for the care. | You also purchase medical items from a chemist. | Your payments to entity A for the 2014-15 financial year is over the relevant threshold. | Your adjusted taxable income for the 2014-15 is under $90,000. | You did not receive a medical expenses tax offset in the 2012-13 financial year.