ATO Interpretative Decision

ATO ID 2002/57

Income Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the taxpayer entitled to a medical expense tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) for expenses incurred in using a room in their home as a dedicated therapeutic treatment room and other incidental expenses of a therapy program?

Decision

No. The taxpayer is not entitled to a medical expense tax offset under section 159P of the ITAA 1936 for expenses incurred in using a room in their home as a dedicated therapeutic treatment room and other incidental expenses of a therapy program.

Facts

The taxpayer's dependant has a medical condition that requires ongoing therapy.

This therapy qualifies as 'therapeutic treatment' for the purposes of a medical expense tax offset.

The taxpayer has set aside a room in their home which is used solely for the provision of this therapy.

The taxpayer incurs expenses in relation to that room, such as a portion of household electricity, rates and interest on a mortgage.

The taxpayer also incurs incidental expenses in running the therapy program. These expenses include stationary, telephone and photocopying.

Reasons for Decision

Subsection 159P(3A) of the ITAA 1936 provides that a tax offset is allowable to a taxpayer whose net medical expenses in the year of income exceed $1250. The medical expenses must be paid by the taxpayer in respect of themselves or their dependant.

Medical expenses are defined in subsection 159P(4) of the ITAA 1936. Paragraph (d) of the definition provides that a medical expense includes a payment for therapeutic treatment administered by direction of a legally qualified medical practitioner.

In Case R95 84 ATC 633; Case 148 27 CTBR (NS) 1154, the Administrative Appeals Tribunal found that 'therapeutic treatment' necessitated the exercise of professional skill in the medical field in a way which normally involved the person administering the treatment using drugs or physical or mental processes for the purpose of curing or managing the disease or disorder.

The expenses incurred by the taxpayer are not payment for therapeutic treatment.

The expenses incurred in relation to setting aside a dedicated treatment room are more in the nature of preliminary expenses. They are incurred in order to facilitate the treatment but are not payments for the therapeutic treatment.

The incidental expenses, such as stationary, telephone and photocopying are not incurred as part of the therapeutic treatment. Again they are incurred in order to manage the program and facilitate the treatment but they are not payments for the therapeutic treatment.

Accordingly, these expenses are not medical expenses for the purpose of subsection 159P(4) of the ITAA 1936. The taxpayer is therefore not entitled to a medical expenses tax offset under section 159P of the ITAA 1936 in relation to those expenses.

Year of income:  Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1936
   section 159P
   subsection 159P(3A)
   subsection 159P(4)

Case References:
Case R95
   84 ATC 633

Related ATO Interpretative Decisions
ATO ID 2001/182
ATO ID 2001/626

Keywords
Medical expenses
Medical expenses rebates
Alternative health expenses
Rebates

Business Line:  Small Business/Individual Taxpayers

Date of publication:  24 January 2002

ISSN: 1445-2782