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Edited version of private ruling
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Ruling
Subject: Medical expenses tax offset
Should your net medical expenses be reduced by out-of-pocket medical expenses which are reimbursed to you using the yearly package bonus included in your private health insurance?
Yes.
This ruling applies for the following period
Year ended 30 June 2007
Year ended 30 June 2008
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commenced on
1 July 2006
Relevant facts
You and all members of your family are covered by private health insurance which includes hospital and extras.
The package entitles your family to a yearly package bonus.
The yearly package bonus can be used for a number of items, including any out-of-pocket expenses such as those from a visit to a doctor.
During the 2009-10 income year, the bonus package was used for the payment of out-of-pocket medical expenses.
Your total non refundable medical expenses for the 2009-10 income year are in excess of $1,500.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 159P
Income Tax Assessment Act 1936 section 159P(1)
Reasons for decision
A medical expense tax offset is available under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936), where a taxpayer incurs medical expenses in an income year for themselves or a dependant who is an Australian resident. The tax offset is 20% of the amount by which the net medical expenses exceed the 'rebatable amount' set down for a year of income.
Subsection 159P(1) of the ITAA 1936 states that the 'rebatable amount' in an income year is the amount paid by the taxpayer in the year of income as medical expenses in respect of themselves or a resident dependant, less any amount paid to the taxpayer or any other person, and any amount which the taxpayer or any other person is entitled to be paid, in respect of those medical expenses by a government or public authority or by a society, association or fund (whether incorporated or not).
The 'rebatable amount' is subject to change in any income year. However, for the 2009-10 income year the 'rebatable amount' is $1,500.
In your case, you are entitled to claim any out-of-pocket medical expenses through your private health fund using the yearly package bonus. As stated in subsection 159P(1) of the ITAA 1936, the 'rebatable amount' is reduced by any amount paid to you or any other person in respect of medical expenses. Therefore, those out-of-pocket medical expenses reimbursed to you using your yearly package bonus cannot be included in calculating the 'rebatable amount' for the medical expense tax offset.