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Edited version of your written advice

Authorisation Number: 1013036079629

Date of advice: 20 June 2016

Ruling

Subject: Medical expenses tax offset

Question

Are you entitled to a medical expenses tax offset in the 2013-14 or 2014-15 financial years?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on

1 July 2013

Relevant facts

You received an ETP in the 2013-14 financial year.

Because of the ETP your family income for the 2013-14 financial year, was over $180,000. Your net medical expenses were under $5,000.

You received a medical expenses tax offset in the 2009-10 to 2012-13 financial years. You did not receive a medical expenses tax offset in the 2013-14 financial year.

For the 2014-15 financial year, your family income was below $180,000 and your net medical expenses were under $5,000.

You have various chronic conditions which account for the substantial medical expenses. Your medical expenses do not relate to disability aids, attendant care or aged care.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 159P

Detailed reasoning

Medical expenses tax offset

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.

Under changes to the legislation, the medical expenses tax offset is being phased out.

As outlined in subsection 159P(1C) of the ITAA 1936, to be eligible to claim this offset in 2013-14, you must have either:

To be eligible to claim a medical expenses tax offset in 2014-15, you must have either:

The medical expenses tax offset is income tested. The percentage of net medical expenses you can claim is determined by your adjusted taxable income (ATI) and family status.

For the 2013-14 financial year where your family's (you and your spouse's) ATI is $176,000 or less, you are entitled to a medical expenses tax offset equal to 20% of your net medical expenses over $2,162. If your family ATI is above $176,000, you are entitled to a medical expenses tax offset equal to 10% of your net medical expenses over $5,100.

In your case you received a medical expenses tax offset in the 2012-13 financial year. However for the 2013-14 financial year your family ATI was over $176,000 and your net medical expenses tax offset was under $5,100. Therefore you did not receive a medical expenses tax offset.

ATI is the sum of the following amounts:

less the amount of the deductible child maintenance expenditure for that year.

As your ETP is part of your taxable income, it is included when calculating your family ATI. The legislation does not provide any discretion or exceptions to omit a one-off ETP payment when calculating your ATI.

As you did not receive a medical expenses tax offset in the 2013-14 financial year you are unable to claim a medical expenses tax offset in the 2014-15. Your medical expenses do not relate to disability aids, attendant care or aged care.

Your specific circumstances are acknowledged, however, the legislation provides no discretion in your situation and does not allow a medical expenses tax offset in the 2013-14 and 2014-15 financial years.

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