Private ruling: Medical expenses tax offset
Published: November 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2010

Ruling: Q1: Do the net costs associated with your child's therapy qualify as eligible medical expenses for the purposes? | A1: Yes. | Q2: Do the items you have purchased to assist with your child's therapy qualify as eligible medical expenses for the purpose of the medical expenses tax offset? | A2: No.

Relevant facts and circumstances: Your child has been diagnosed with a condition. Your legally qualified medial practitioner referred your child to a specialist who then referred your child to several therapists for treatment. You have purchased several everyday items to assist with your child's therapy. Your medical practitioner follows up this treatment through regular consultations.

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) | Income Tax Assessment Act 1936 Paragraph 159P(4)(d) | Income Tax Assessment Act 1936 Paragraph 159P(4)(f)

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 threshold amounts are $2,000 for the 2010-11 financial year and $2,060 in the 2011-12 financial year. The amount of net medical expenses tax offset you can claim in the 2012-13 financial year will now depend on your level of income. You will be able to claim an offset of 10% of your net medical expenses over $5,000 if you have an adjusted taxable income (ATI) above: o $84,000 if you are single, or o $168,000 if you are a couple or family The family threshold will increase by $1,500 for each dependent child after the first. If your ATI is below these income thresholds, you are not affected by this change and can continue to claim an offset of 20% of your net medical expenses over the relevant threshold amount. For the 2012-13 financial year the threshold amount is $2,120. Please note that the threshold amount is subject to indexation and will change in future income years. Therapeutic treatment Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the medical expenses tax offset. The Commissioner does not have the discretion to allow the medical expenses tax offset for any other costs. 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. 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. 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 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 has been referred, by a legally qualified medical practitioner, to particular therapists so that your child can receive specific therapeutic treatment. The purpose of this treatment is to improve various aspects of your child's condition. Your medical practitioner follows up this treatment through regular consultations. Therefore, the out of pocket expenses you have paid for the various treatments qualify as eligible medical expenses for the purposes of the medical expenses tax offset and you are entitled to include the unreimbursed costs in your calculation of the medical expense tax offset. Medical and surgical appliances Paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner. Taxation Ruling TR 93/34 explains the meaning of a 'medical or surgical appliance' as an instrument, apparatus or device which is manufactured as, or distributed as, or generally recognised to be an aid to the function or capacity of a person with a disability or illness. This definition looks to the character of the appliance, not the purpose for which it is prescribed or used. It is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends. The equipment you have purchased consist of everyday items, although the items may be used in conjunction with your child's treatment, they are not manufactured or distributed as disability aids. Therefore, these items are not considered to be medical or surgical appliances and do not qualify as eligible medical expenses for the purpose of the medical expenses tax offset.