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Edited version of your written advice
Authorisation Number: 1012674850641
Ruling
Subject: medical expenses
Question 1
Are payments to Medicare eligible medical expenses for the purposes of the net medical expenses tax offset (NMETO)?
Answer
No.
Question 2
Are you entitled to a NMETO for the 2013-14 financial year?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts
You received a lump sum compensation payment.
From this lump sum you had to repay an amount to Medicare.
The amount repaid to Medicare relates to injuries received during the relevant financial year.
You claimed a NMETO in the relevant financial year.
You did not claim a NMETO in the subsequent financial year.
You did not make a payment relating to a disability, attendant care or aged care.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 159P
Detailed reasoning
A medical expenses tax offset is available under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where you pay certain medical expenses in an income year for yourself or a dependant who is an Australian resident, to the extent that you are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund.
The payment you have made to Medicare is not considered to be an eligible medical expense and therefore cannot be included in any claim for a NMETO.
Notwithstanding that the repayment to Medicare is not considered to be an eligible expense, under recent changes to the legislation, the medical expenses tax offset is being phased out and you would not be allowed an offset even if the expenses were eligible expenses.
From 1 July 2013, those taxpayers who included a medical expenses tax offset in their 2012-13 income tax assessment will continue to be eligible for the offset for the 2013-14 income year if they have eligible out-of-pocket medical expenses above the relevant claim threshold (subsection 159(1C) of the ITAA 1936).
Where a NMETO was not included in the 2012-13 financial year, the NMETO is available for taxpayers up to 30 June 2019 who have medical expenses relating to certain disability aids, attendant care or aged care and satisfy other requirements of section 159P of the ITAA 1936.
In your case you did not include a NMETO in the 2012-13 financial year and any eligible expenses were not paid in relation to disability aid, attendant or aged care and therefore you are not entitled to claim a NMETO in the 2013-14 year.
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