Private ruling: Medical expenses tax offset
Date of advice: 20 June 2016
Published: August 2016
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a medical expenses tax offset in the 2013-14 or 2014-15 financial years? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 159P Detailed reasoning | Medical expenses tax offset | 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 changes to the legislation, the medical expenses tax offset is being phased out. | As outlined in subsection 159P(1C) of the ITAA 1936, to be eligible to claim this offset in 2013-14, you must have either: | • received this offset in your 2012-13 income tax assessment, or | • paid for medical expenses relating to disability aids, attendant care or aged care. | To be eligible to claim a medical expenses tax offset in 2014-15, you must have either: | • received this offset in your 2012-13 and 2013-14 income tax assessments, or | • paid for medical expenses relating to disability aids, attendant care or aged care. | The medical expenses tax offset is income tested. The percentage of net medical expenses you can claim is determined by your adjusted taxable income (ATI) and family status. | For the 2013-14 financial year where your family's (you and your spouse's) ATI is $176,000 or less, you are entitled to a medical expenses tax offset equal to 20% of your net medical expenses over $2,162. If your family ATI is above $176,000, you are entitled to a medical expenses tax offset equal to 10% of your net medical expenses over $5,100. | In your case you received a medical expenses tax offset in the 2012-13 financial year. However for the 2013-14 financial year your family ATI was over $176,000 and your net medical expenses tax offset was under $5,100. Therefore you did not receive a medical expenses tax offset. | ATI is the sum of the following amounts: | • taxable income, | • reportable superannuation contributions, | • total net investment loss, | • adjusted fringe benefits, | • tax free pension or benefit | • target foreign income, | less the amount of the deductible child maintenance expenditure for that year. | As your ETP is part of your taxable income, it is included when calculating your family ATI. The legislation does not provide any discretion or exceptions to omit a one-off ETP payment when calculating your ATI. | As you did not receive a medical expenses tax offset in the 2013-14 financial year you are unable to claim a medical expenses tax offset in the 2014-15. Your medical expenses do not relate to disability aids, attendant care or aged care. | Your specific circumstances are acknowledged, however, the legislation provides no discretion in your situation and does not allow a medical expenses tax offset in the 2013-14 and 2014-15 financial years.


Relevant facts: You received an ETP in the 2013-14 financial year. | Because of the ETP your family income for the 2013-14 financial year, was over $180,000. Your net medical expenses were under $5,000. | You received a medical expenses tax offset in the 2009-10 to 2012-13 financial years. You did not receive a medical expenses tax offset in the 2013-14 financial year. | For the 2014-15 financial year, your family income was below $180,000 and your net medical expenses were under $5,000. | You have various chronic conditions which account for the substantial medical expenses. Your medical expenses do not relate to disability aids, attendant care or aged care.