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

Ruling: Q1: Do the costs associated with your surgery qualify as eligible medical expenses for the purposes of the medical expenses tax offset? | A1: Yes.

Relevant facts and circumstances: You were clinically diagnosed with a condition which required treatment. You were referred by your legally qualified medical practitioner to a clinic which specialises in the treatment of your condition. As part of the treatment you underwent a surgical procedure. You have provided copies of letters from your legally qualified medical practitioner and the surgeon stating that you underwent the surgery on their advice due to medical reasons. You received a rebate from Medicare Australia for some of the item numbers.

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 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: · $84,000 if you are single, or · $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. Payments to a legally qualified medical practitioner or a public or private hospital for gastric sleeve surgery falls within the definition of medical expenses in sub-section 159P(4) of the ITAA 1936 as being in respect of an illness or an operation. In your case, you were diagnosed with a life treating condition. Your legally qualified medical practitioner referred you to a clinic which specialises in treatment for your condition. As part of the treatment you underwent a surgical procedure. Accordingly, the out of pocket expenses you have paid to the clinic and private hospital are considered eligible medical expenses and you are entitled to include the net costs in the calculation of the medical expenses tax offset.