Private ruling: Medical expenses tax offset - therapeutic treatment
Published: November 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Do the of pocket expenses you have paid for therapy qualify as eligible medical expenses for the purposes of the medical expenses tax offset? | A1: Yes.

Relevant facts and circumstances: You are a resident of Australia for tax purposes. You have a dependent child who has been diagnosed with a medical condition. Your child's legally qualified medical partitioner and paediatrician have referred your child to a particular person for therapy. Your child has regular appointments with their legally qualified medical partitioner and paediatrician to monitor their condition. The cost of the therapy does not qualify for a Medicare or Private Health Insurance benefit.

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. 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. Please note that the threshold amount is subject to indexation and will change in future income years. | Detailed Reasoning - Therapeutic treatment: Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the medical expenses tax offset. Paragraph (d) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes 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 It was held in Case A53 69 ATC 313; 15 CTBR (NS) Case 30 that the mere suggestion or recommendation by a medical practitioner that the patient undergoes therapeutic treatment is not sufficient for the payment to qualify as medical expenses. The patient would have to be referred by a medical practitioner to a particular person for specific treatment. Although the treatment must be administered by direction of a legally qualified medical practitioner, the treatment need not be administered by such a practitioner. In your case, your child was referred for therapy by your legally qualified medical practitioner. It is considered that the therapy satisfies the definition of therapeutic treatment. Therefore the out-of-pocket expenses you have paid for your child's therapy are eligible medical expenses for the purposes of the medical expenses tax offset and can be included in your calculation of the medical expenses tax offset. Allowable expenses would be those for program supervision, administration and therapy fees.