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Authorisation Number: 1011485149054

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Ruling

Subject: Medical expenses tax offset

Question

Are you entitled to a medical expenses tax offset for the cost of a weight loss and health management program recommended by your medical practitioner?

Answer

No.

This ruling applies for the following period:

Income year ended 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You have been diagnosed by your medical practitioner with obesity and in a high risk category of developing type two diabetes.

Your medical practitioner verbally referred you to a weight loss program to assist in managing your obesity and to prevent you from developing type two diabetes.

You are not required to have a referral by a medical practitioner to attend the weight loss program; however you must have a medical practitioner's approval to participate in the program.

Your medical practitioner conducts regular check ups and is monitoring your progress in the weight loss program by examining the detailed reports compiled by the program providers.

The program is a live-in arrangement and the costs that you have incurred cover:

· accommodation

· all meals (meals are chef prepared and no part of the program relies on dietary supplements - rather the focus is on healthy eating habits)

· face to face contact with trainers and educators

· fitness education and personalised exercise classes

· nutrition seminars

· label education and food psychology, goal setting and meal planning seminars

· restaurant and menu education and cooking classes

· Tai Chi and relaxation instruction

· workbook with exercises, weight loss and healthy lifestyle information

· phone and email support

· subscription to the weekly focus emails and monthly newsletter

· outdoor fitness excursions, and

· a heart rate monitor.

The program is not a diet and does not include supplements, meal replacements or other extreme forms of weight loss; rather the program is a comprehensive and premier weight loss and lifestyle modification program that aims to assist attendees to change their beliefs and behaviours towards food and exercise to achieve long term weight loss and health improvements.

You are not able to claim the expenses under Medicare or a private health fund.

You have written documentation supporting your diagnosis from your doctor.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P,

Income Tax Assessment Act 1936 Subsection 159P(4),

Income Tax Assessment Act 1936 Paragraph 159P(4)(a) and

Income Tax Assessment Act 1936 Paragraph 159P(4)(d).

Medical expenses tax offset

A medical expenses 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 $1,500 for that income year.

Medical expenses are defined in subsection 159P(4) of the ITAA 1936. Paragraphs (a) and (d) of subsection 159P(4) of the ITAA 1936 relate to payments in respect of an illness and therapeutic treatments with the remaining paragraphs defining medical expenses in relation to dental procedures, artificial limbs, surgical appliances, invalid attendants and assistance dogs.

Payment in respect of an illness

Paragraph (a) of the definition contained in subsection 159P(4) of the ITAA 1936 includes payments made to a legally qualified medical practitioner, nurse or chemist, or a hospital in respect of an illness or operation.

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

The meaning of the term "illness" was discussed by Taxation Board of Review No. 3 in Case Q21, 83 ATC 77: Case 85 26 CTBR(NS) 570. Dr Gerber expressed his understanding of the concept of illness in these words:

"….. I find the term includes any condition marked by a pronounced deviation from the normal healthy state. If this is the correct view, 'illness' must include any disorder of body, function or systems."

Therapeutic treatment

Paragraph 159P(4)(d) of the ITAA 1936 includes in the definition of medical expense, a payment, 'for therapeutic treatment administered by direction of a legally qualified medical practitioner'.

Therapeutic treatment as a concept is concerned with healing or curing, rather than preventing the need for therapy (Case T67 (1968) 18 TRBD 346; (1967) 14 CTBR (NS) Case 31). Therapeutic treatment involves the exercise of professional skill in the medical field in a way which normally involves the person administering the treatment using drugs or physical or mental processes of one kind or another for the purpose of curing or managing a disease or ailment (Case R95 84 ATC 633; (1984) 27 CTBR (NS) Case 148).

Application to your circumstances

In your case, you participated in a health program that is designed to teach you how to manage your weight and lead a healthy lifestyle upon the recommendation of your medical practitioner to manage your obesity and type two diabetes risk. Obesity is not considered an illness within the ordinary meaning of the term, as it is not a sickness, disease or disorder of body, function or systems. As such, the costs you incurred were not made in respect of an illness or operation. Therefore, the expenses you incurred do not meet the definition in paragraph 159P(4)(a) of the ITAA 1936.

While there are potential risks to your health as a result of your obesity, as explained above, obesity is not an illness. The health program you participated in was to manage your weight and prevent developing an illness or disease like type 2 diabetes. The costs associated with attending the program related to preventing a future illness (diabetes) and not in the cure or management of an existing illness. Therefore, the cost you incurred in respect of the health program does not qualify as a medical expense under either paragraphs (a) or (d) of subsection 159P(4) of the ITAA 1936. The medical expenses defined at the remaining paragraphs of subsection 159P(4) do not apply to your circumstances.

According, you are not eligible for a medical expenses tax offset for a controlled weight loss program under section 159P of the ITAA 1936.