Private ruling: Medical expenses tax offset - surgical procedure
Published: August 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Is an amount paid to a hospital for a surgical procedure considered an eligible medical expense for the purposes of the medical expense tax offset? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You were diagnosed with a condition. You underwent a surgical procedure. You have out-of-pocket medical expenses in relation to this procedure. You have received a net medical expenses tax offset amount in your income tax assessment for the year ended 30 June 2013.

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. 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. 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. In addition, for the 2013-14 and 2014-15 financial years, taxpayers will be eligible to claim the full range of medical expenses (as defined currently) but only if they have received an amount of the net medical expenses tax offset in the previous financial year (or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 financial year). In your case, you have received an amount of the NMETO in your 2012-13 income tax assessment, therefore you are entitled to make a NMETO claim in the 2013-14 financial year for the entire range of medical expenses that are eligible under section 159P, not just those for disability aids, attendant care or aged care. Surgical procedure Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the net medical expenses tax offset. Paragraph (a) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation. In your case, you have out-of-pocket medical expenses in relation to your surgical procedure. The amount paid for the surgery is considered to be an eligible medical expense for the purposes of the medical expense tax offset. Accordingly, you are entitled to include the cost of your surgery in your calculation of the medical expenses tax offset.