ATO Interpretative Decision

ATO ID 2004/272

Income Tax

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

Issue

Is a taxpayer entitled to a medical expense tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) for medical expenses paid from a joint bank account?

Decision

Yes. A taxpayer is entitled to a medical expense tax offset under section 159P of the ITAA 1936 for medical expenses paid from a joint bank account, but only to the extent of their beneficial ownership of the bank account.

Facts

The taxpayer incurred medical expenses in excess of $1500.

The expenses were paid from a bank account held jointly with their spouse.

All funds in the bank account were deposited by the taxpayer as they were the sole income earner.

All the expenses were paid in the year of income.

The taxpayer received no reimbursement from a government, public authority, society, association or fund.

Reasons for Decision

Subsection 159P(1) of the ITAA 1936 states:

An amount paid by the taxpayer in the year of income as medical expenses in respect of himself, or in respect of a dependant who is a resident, less any amount paid to the taxpayer or any other person, and any amount which the taxpayer or any other person is entitled to be paid, in respect of those medical expenses by a government or public authority or by a society, association or fund (whether incorporated or not) shall, for the purposes of this section, be treated as a rebatable amount in respect of that year of income.

There is a general presumption that holders of a joint account have joint beneficial ownership of the moneys in equal share (Tanumihardjo v. FC of T 97 ATC 4817; (1997) 36 ATR 400). This presumption can be rebutted by evidence to the contrary (see Case Z7 92 ATC 131; AAT Case 7675 (1991) 22 ATR 3591).

In this case the taxpayer has shown that the entire amount deposited in the account was derived from their income. No amount was deposited by their spouse. As such, it is accepted that the taxpayer has the beneficial ownership of the funds.

As such, the taxpayer is entitled to the entire medical expense tax offset under section 159P of the ITAA 1936.

It should be noted that if the taxpayer was unable to show to whom the funds in the account belonged they would only be entitled to 50% of the tax offset.

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   section 159P
   subsection 159P(1)

Case References:
Tanumihardjo v. FC of T
   97 ATC 4817
   (1997) 36 ATR 400

Related ATO Interpretative Decisions
ATO ID 2004/273

Keywords
Medical expenses rebates

Business Line:  Business and Personal Taxes Centre of Expertise

Date of publication:  26 March 2004

ISSN: 1445-2782