ATO Interpretative Decision
ATO ID 2002/934
Income Tax
Medical expenses tax offset - company provided carerFOI status: may be released
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This ATO has been amended to improve clarity.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Do payments made by a taxpayer to a company for the provision of a carer qualify as medical expenses for the purposes of a medical expenses tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. Payments made by a taxpayer to a company for the provision of a carer qualify as medical expenses for the purposes of a medical expenses tax offset under section 159P of the ITAA 1936.
Facts
The taxpayer is permanently confined to a wheelchair.
The taxpayer makes payments to a company for the provision of a carer..
Carers provided by the company are not legally qualified as medical practitioners or nurses.
The company pays the wages of the carers from the payments received from the taxpayer after deducting its administrative costs.
Reasons for Decision
Subsection 159P(3A) of the ITAA 1936 provides that a rebate of tax (tax offset) is allowable to a taxpayer whose net medical expenses in the year of income exceed a threshold dollar amount specified in the legislation.
The term 'medical expenses' is defined in subsection 159P(4) of the ITAA 1936. It includes payments made 'as remuneration of a person for services rendered by him as an attendant of a person who is blind or permanently confined to a bed or an invalid chair' (paragraph 159P(4)(h) of the ITAA 1936.
In order to qualify as a medical expense, paragraph 159P(4)(h) of the ITAA 1936 does not require that the payment be made to a specific person but rather that it be paid 'as remuneration of a person' for services the person provides as an attendant. There is no requirement therefore that the payment be made directly to the person who provides the care.
Where payment by the taxpayer is made to an entity other than the carer, the only amount which will qualify for the tax offset is the amount that represents the remuneration (for example wages) of a person for providing services as an attendant or carer.
Where an entity other than the carer receives the taxpayer's payment and then deducts an amount for its administration costs, those costs are not remuneration of the person for providing services as an attendant or carer and will therefore not qualify as medical expenses.
This interpretation has been supported in the Small Taxation Claims Tribunal, in [2001] AATA 944 (Unreported, Senior Member MD Allen, 15 November 2001). In that case the Tribunal allowed a taxpayer a medical expenses tax offset in respect of expenses paid to a company that provided carers. The rebatable amount only included payments actually made by the company to the carers. The portion of the expenses that was retained by the company for administrative services was not included as part of the rebatable amount.
Accordingly, payments made by the taxpayer to a company for the provision of a carer qualify as medical expenses for the purposes of the medical expenses tax offset to the extent that the payments represent remuneration of a person for providing services as an attendant or a carer.
Date of decision: 5 September 2002Year of income: Year ended 30 June 2001 Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
subsection 159P
subsection 159P(3A)
paragraph 159P(4)(h)
Case References:
[2001] AATA 944
(Unreported, Senior Member MD Allen, 15 November 2001)
ATO ID 2001/29
ATO ID 2001/480
Keywords
Medical expenses
Medical expenses tax offset
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 5 September 2002 | Original statement |
| 8 January 2016 | Updated statement | |
| 11 August 2017 | Archived |