Private ruling: Tax offset - medical expenses - medical aids
Published: June 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Do your out-of-pocket expenses in relation the purchase of medical aids qualify for inclusion in the calculation of the medical expenses tax offset? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident for tax purposes. A specialist has diagnosed you with medical loss. You have out-of-pocket expenses in relation to the purchase of the medical aids. You have not received a reimbursement from Medicare or a private health fund. You did not receive an amount of the medical expenses tax offset in your 2012-13 income tax assessment.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 159P(1) | Income Tax Assessment Act 1936 Paragraph 159P(4)(e)

Reasons for decision: Summary: 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. This tax offset is income tested. The percentage of net medical expenses you can claim and the threshold amount is determined by your adjusted taxable income (ATI) and family status. It should also be noted that the threshold amount is subject to indexation and will change in future income years. The net medical expenses tax offset (NMETO) is being phased out between the 2013-14 and 2018-19 financial years and eligibility for this offset has changed restricting who can claim and what medical expenses can be claimed. Transitional arrangements will allow taxpayers to claim the offset from the 2013-14 financial year until the end of the 2018-19 financial year, but only for those medical expenses relating to disability aids, attendant care or aged care, regardless of whether they have receive an amount of the NMETO in the previous year. In addition, for the 2013-14 and 2014-15 financial years, taxpayers will be able to claim the full range of medical expenses but only if they have received an amount of the NMETO in the previous year, i.e. in their 2012-13 income tax assessment or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 financial year. In your case, you have not received an amount of the medical expense tax offset in your 2012-13 income tax assessment so your are limited to claims relating to disability aids, attendant care or aged care only. Based on your circumstances paragraph 159P(4)(e) of the ITAA 1936 would be the only provision where your medical expenses payment can be considered. This paragraph states:- in respect of an artificial limb (or part of a limb), artificial eye or medical aid; or In your case, you suffer from medical loss which is considered to be a disability. You purchased medical aids to assist with the management of your medical loss. Therefore, you are entitled to include your out-of-pocket costs for the medical aids in your calculation of the net medical expenses tax offset.

Reasons for decision 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.