Edited version of your private ruling

Authorisation Number: 1012471995323

Ruling

Subject: Medical Expense Tax Offset

Question 1

Are you entitled to a deduction for the medical costs you incurred for dental treatment in a foreign country?

Answer

No

Question 2

Are you entitled to a tax offset for the medical costs you incurred for dental treatment in a foreign country?

Answer

Yes

This ruling applies for the following periods:

Financial year ending 30 June 2012

Financial year ending 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

· You are an Australian resident.

· You received dental treatment in a foreign dental centre.

· The dental treatment was necessary to restore tooth deterioration and chronic periodontal disease.

· The Medical Certificate price was in a foreign currency.

· The dentist who performed the dental procedures was legally qualified in the foreign country.

· You have not received any payments or reimbursements for the dental treatment from a government or public authority or by a society, association or fund.

· You stated that you underwent further dental treatment in the relevant financial year of the same nature to your treatment in 20XX. You have asked the ATO to consider this dental treatment as part of this ruling.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1936 section 159P

Income Tax Assessment Act 1997 section 960-50

Taxation Administration Act 1953 subsection 45-330(1)

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for an outgoing if it is incurred in producing assessable income. However this section does not apply if the outgoing is of a private or domestic nature.

Medical expenses are considered inherently private in nature and accordingly the expenses incurred relating to your dental treatment are not deductible.

Subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) allows an offset for medical expenses. Under this section an amount is treated as a rebatable amount in the year of income in which it is paid. It includes amounts paid by an Australian resident taxpayer for personal medical expenses and for their dependants who must also be residents. The rebatable amount is reduced by an entitlement to be paid, in respect of those medical expenses from a government or public authority or by a society, association or fund.

Subsection 159P(3A) allows you to claim a tax offset in your assessment for the rebatable amount which exceeds the threshold. The rebatable amount is 20% of the threshold's excess, which in the 2011-12 financial year is $2,060 and is indexed annually.

Subsection 159P(4) of the ITAA 1936 states that 'medical expenses' include a payment to a legally qualified dentist for dental services or treatment or the supply, alteration or repair of artificial teeth. For a dentist to be 'legally qualified' they must be legally qualified under the law of the place where he or she practices. The costs you incurred are medical expenses as they were carried out by a legally qualified dentist for the supply, alteration and repair of artificial teeth. They are rebatable amounts under subsection 159P(1) of the ITAA 1936. Your dental treatment in the relevant financial year is of the same nature to the treatments listed above and will be considered as medical expenses.

In your situation, the expenses you have paid in relation to your dental treatment are accepted as being medical expenses for the purposes of the medical expenses tax offset. Therefore you are entitled to claim a tax offset for 20% of the medical expenses in excess of the threshold for each income year.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).