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Edited version of private ruling

Authorisation Number: 1011472495238

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Ruling

Subject: Medical expenses - tax offset

Question and answers:

Do the payments made to an agency for the provision of providing registered nurses qualify as a medical expense for the purpose of the medical expense tax offset?

Yes

This ruling applies for the following period

Year ended 30 June 2009

The scheme commenced on

1 July 2008

Relevant facts

You have been using a ventilator since an early age.

You require 24 hour care seven days a week as someone is required to be in full view of you at all times to monitor your ventilator machine.

You have no motor skills and are confined to a bed or wheelchair.

You have enlisted the services of an agency to provide you with care in terms of registered nurses.

The primary responsibility of the registered nurses is to monitor your ventilator machine. This requires the nurses to be in full view of you and the machine 24 hours a day.

You also suffer daily spasms which require the nurses to provide you with medications.

The nurses also perform the following tasks:

For the services provided by the agency you have incurred expenses.

There is no administration costs included in the expenses incurred.

You have not received a refund from either Medicare or your private health fund for the expenses incurred for services provided by the agency.

You have documentation to support your claim.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

Reasons for decision

A medical expense tax offset is available to a taxpayer under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936), where the taxpayer incurs medical expenses in an income year for themselves or a dependant who is an Australian resident. The medical expense tax offset is 20% of the amount by which the net medical expenses exceed the medical expense tax offset threshold. For the 2008-09 financial year the threshold amount is $1500.

The term 'medical expenses' is defined in paragraph 159P(4) of the ITAA 1936 to include 'payments made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation'.

Where the payment is made to another entity, such an agency that sources and provides nursing care, the only amount which will qualify for the tax offset is the amount that represents the remuneration to the nurse. If the entity providing the care includes administration costs as part of the total cost for their services then the administration costs would not qualify as medical expenses.

The term 'illness' is not defined in the ITAA 1936 and therefore it is necessary to look at the ordinary meaning of the term. An illness includes a sickness, disease, or disorder of the body or the mind and involves a deviation from the normal healthy state.

In your case, you have an illness whereby you are permanently confined to a bed or wheelchair. You have enlisted the services of registered nurses through an agency. Although the nurses perform a number of other duties including feeding and tending to your hygiene needs, the primary function of the registered nurses is to monitor your ventilator machine, which requires them to be in full view of you 24 hours a day. They also give medications when required to control regular spasms. Therefore the payments are considered to be made in respect of your illness.

Accordingly, the payments made to the agency specifically for the remuneration of services provided by the registered nurses, which would be the total amount paid as you have stated there is no amounts deducted for administration costs, do qualify as a medical expense for the purposes of the medical expense tax offset, under section 159P of the ITAA 1936.

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