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Ruling

Subject: Medical expenses tax offset

Question 1

Are the following expenses considered to be medical expenses for the purposes of calculating the medical expenses tax offset:

a) nursing care;

b) pharmacy medicines;

c) wheelchair;

d) speech pathology; and

e) medical treatment by a doctor?

Answer

Yes.

Question 2

Are travel, ambulance transport and accommodation expenses considered to be medical expenses for the purposes of calculating the medical expenses tax offset?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You and your spouse are Australian Residents for tax purposes.

In 2011, your spouse was admitted to hospital and underwent surgery.

They were thereafter transferred to the intensive care department and then they were assessed to receive permanent residential care at a high level. Your spouse is totally incapacitated.

You were professionally advised that no further medical treatment for the condition was readily available through the public health system in Australia and a decision was made to travel overseas for further treatment and management of your spouse's medical ailment.

Based on all medical reports, an overseas specialist confirmed that the patient's state had worsened and recommended that they undergo further surgery.

In 2012, your spouse travelled overseas by air with a transit stopover. They were transported by ambulance to the airport on a medical stretcher. During the transit stopover, your spouse was admitted to a medical centre for a medical procedure.

Upon arrival overseas your spouse was transferred directly to a hospital.

The transport of the patient from the care facility in Australia to overseas had to be customised to transport your spouse by ambulance for air travel on a medical stretcher accompanied by yourself and a qualified doctor.

Your spouse underwent surgery in 2012 at the overseas hospital and is continuing to receive various post surgical and therapeutic treatments as prescribed by the specialist and their qualified team.

Your spouse's treatment has been recommended by the specialist who operated and they are currently being monitored by the specialist. Post surgery, your spouse is under the direct supervision and care of the specialist and is receiving rehabilitation. All the aforesaid rehabilitation treatments are carried out by appropriately qualified medical specialists.

You incurred medical and travel expenses and you have provided documentary evidence of these expenses.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159P(3A)

Income Tax Assessment Act 1936 Subsection 159P(4)

Income Tax Assessment Act 1936 Paragraph 159P(4)(f)

Reasons for decision

Subsection 159P(3A) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a rebate of tax (tax offset) is allowable to a taxpayer whose net medical expenses in the year of income exceeds the threshold dollar amount specified in subsection 159P(3A).

A rebate is available to a taxpayer whose net medical expenses in the year of income exceed a certain threshold. For the 2011-12 financial year, you can claim a tax offset of 20% (that is, 20 cents in the dollar) of your net medical expenses over $2,060. There is no upper limit on the amount you can claim.

Net medical expenses are the medical expenses you have paid less any refunds of these expenses which you or any other person has received, or are entitled to receive, from Medicare or a private health insurer.

Subsection 159P(4) of the ITAA 1936 defines 'medical expenses' as payments that include payments to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation (paragraph (a) of the definition).

To qualify for the tax offset the medical expenses must be paid by a resident taxpayer in respect of themselves or a resident dependant. However it is not necessary that the payments be made to a resident of Australia or that they be paid in Australia.

The definition does not include the costs of travel, transport or accommodation to obtain medical treatment. This was confirmed by the decision of the Administrative Appeals Tribunal in Case R12 84 ATC 165; (1984) 27 CTBR (NS) Case 63. In that case, travelling expenses, whilst necessary in order to receive medical treatment, were held not to be a payment for the medical treatment.

The term 'medical expenses' is defined in paragraph 159P(4)(f) of the ITAA 1936 to include payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner.

Taxation Ruling TR 93/34 describes a 'medical or surgical appliance' as being an instrument, apparatus or device which is manufactured, distributed or generally recognised as an aid to the function or capacity of a person with a disability or an illness. An appliance is an aid to function or capacity if it assists or improves a person's abilities in performing activities of daily living.

TR 93/34 explains that wheelchairs are medical or surgical appliances for the purposes of the medical expenses offset.

The payment for the purchase of a wheelchair is therefore in respect of a medical or surgical appliance for the purposes of paragraph 159P(4)(f) of the ITAA 1936.

With the exception of the travel, ambulance transport and accommodation expenses, your remaining expenses therefore qualify as medical expenses for the purposes of calculating the medical expense tax offset under section 159P of the ITAA 1936.

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