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

Ruling: Q1: Are payments made to an approved aged care facility considered to be medical expenses for the purpose of the medical expenses tax offset, where no level of care has been assessed? | A1: No

Relevant facts and circumstances: The deceased was a resident of an approved aged care provider. The facility provides high care and low care accommodation as well as independent living units/serviced apartments. The deceased initially resided in a serviced apartment. The deceased was assessed as requiring low level care during the relevant financial year. The deceased paid a basic monthly fee which covers items such as maintenance, dispensing of medication, laundry, cleaning, 24 hour on call care and a personal care assistant. Most medical expenses are charged separately.

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

Reasons for decision: Summary: A medical expenses tax offset is available under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936), where you incur medical expenses in an income year for yourself or a dependant who is an Australian resident. The medical expense tax offset is only available if the amount of medical expenses (reduced by any entitlement to reimbursement from a health fund or government authority) in an income year exceeds the threshold amount. The threshold for the relevant financial year is $2,060. For the relevant financial year the medical expenses tax offset is 20% of the amount by which the net medical expenses exceed the threshold. Subsection 159P(4) of the ITAA 1936 defines medical expenses to include payments made to a public or private hospital in respect of an illness or operation. An aged care facility or nursing home will be regarded as a hospital for the purposes of subsection 159P(4) of the ITAA 1936 if it provides care to patients who have a continuing need for nursing care because of an illness, disease, incapacity or disability (Taxation Ruling IT 261). In order to be considered to have a continuing need for nursing care, a patient is assessed by an aged care assessment team to require a care level between 1 and 8, where 1-4 is high level care and 5-8 is low level care. Only payments made by a patient who is assessed at a care level between 1 and 7 qualify as payments to a hospital in terms of the medical expenses tax offset. In the deceased's case, they initially resided in an independent living unit. They had not been assessed as requiring any level of care until early in the relevant year. As the deceased had not been assessed as requiring care at a level between 1 and 7 until early in the relevant year, the fees paid prior to this date do not qualify as payments to a hospital. The fees therefore are not considered eligible medical expenses for the purposes of the medical expenses tax offset.