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Edited version of private ruling
Authorisation Number: 1011511103475
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Ruling
Subject: Medical expense Tax Offset
Question 1
Are you entitled to a medical expenses tax offset of 100% of your net medical expenses over the allowable threshold for your laser eye surgery?
Answer
No.
Question 2
Are you entitled to a medical expenses tax offset equal to 20% of your net medical expenses over the allowable threshold for your laser eye surgery?
Answer
Yes
This ruling applies for the following period:
Year ended 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are required to wear prescription glasses.
You are required to have unaided vision to effectively and safely discharge the required duties of your employment.
You find it physically impossible to wear both your glasses and the work helmets simultaneously when undertaking the required duties of your employment.
You intend to have laser eye surgery which will correct your vision so you do not require glasses or contact lenses and provide normal unaided vision whilst undertaking such duties.
Reasons for decision
Summary
You are entitled to a medical expenses tax offset for your eye laser surgery. The offset is calculated as 20% of your net medical expenses over the relevant threshold. The legislation does not allow a percentage greater than 20% to be used in calculating your medical expenses tax offset.
Detailed reasoning
Subsection 159P(3A) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a tax offset is allowable to a taxpayer whose net medical expenses in the year of income exceed the allowable threshold amount of $1,500.
Net medical expenses are the medical expenses a taxpayer has paid less any refunds they receive or could have received, from Medicare or a private health fund.
A taxpayer can claim a tax offset of 20% of the net expenses paid in the year of income in excess of $1,500.
Medical expenses are defined in subsection 159P(4) of the ITAA 1936. Paragraph (a) of the definition includes payments made to a legally qualified medical practitioner 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. An 'illness' would include eye disorders in the nature of short sightedness, long sightedness or a stigma.
The term' operation' is not defined in the ITAA 1936 and therefore it is again necessary to look at the ordinary meaning of the term. An 'operation' in a medical sense means an act or series of acts performed on the body of a patient for their relief or to restore them to a normal condition. It involves the use of surgical instruments as distinguished from therapeutic treatment.
It is accepted that the laser is a surgical instrument.
In your case you have a disorder of the eye which qualifies as an illness. The laser surgery is accepted as being an operation performed in order to correct or improve your condition. The expenses paid to a legally qualified medical practitioner in relation to laser eye surgery qualify as 'medical expenses' for the purpose of the medical expenses tax offset under subsection 159P(4) of the ITAA 1936.
The legislation does not allow for claiming of 100% of net medical expenses over $1,500.
Medical expenses
Generally, medical expenses have no direct connection to gaining or producing assessable income as they relate to a personal medical condition and are private in nature. Therefore expenditure for your eye laser surgery can not be claimed as a deduction under section 8-1 of the Income Tax Assessment Act 1997.
Additional Information
Please note the current threshold is $1,500. Please check for any changes before lodging your 2011 tax return.
Information regarding the medical expenses tax offset is available on the Tax Office website: www.ato.gov.au and in the Taxpack Supplement 2011.