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Edited version of private ruling
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Ruling
Subject: Medical expense tax offset
Question
Are you entitled to a tax offset for medical expenses incurred both in Australia and overseas?
Answer: Yes.
This ruling applies for the following period:
Year ended 30 June 2009
The scheme commences on:
1 July 2008
Relevant facts and circumstances
You are an Australian resident.
Your spouse is an Australian resident.
Your spouse has been diagnosed with an illness.
You paid fees to a research institute under the referral of a doctor.
The therapeutic treatment at the research institute was conducted under the supervision of a doctor.
You travelled overseas in order for your spouse to receive treatment.
The costs overseas paid to a doctor and chemist consisted of hospitalisation, medical treatment and drugs.
Both the doctor in Australia and overseas were legally qualified medical practitioners.
You are not entitled to any reimbursement from either Medicare or private health for this expenditure.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 159P.
Detailed reasoning
Under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) a tax offset is available to a resident taxpayer whose net medical expenses paid in the year of income exceed $1,500. The medical expenses paid must be in respect of themselves or a resident dependant. The tax offset is calculated as 20% of the net medical expenses over $1,500.
Net medical expenses are the medical expenses a taxpayer has paid less any refunds they received, or could have received, from Medicare or a private health fund.
Paragraph 159P(4)(d) of the ITAA 1936 provides that payments made for therapeutic treatment administered by direction of a legally qualified medical practitioner are medical expenses.
As the doctor supervised the therapeutic treatment, the expenses associated with this treatment are eligible medical expenses when calculating your medical expense tax offset.
Paragraph 159P(4)(a) of the ITAA 1936 provides that payments to a legally qualified medical practitioner, nurse, chemist or hospital in respect of an illness or operation are medical expenses.
However, it is not necessary that the payments be made to a resident of Australia or that they are paid in Australia. Therefore, medical expenses paid during an overseas trip may qualify for the tax offset.
In your case, you paid medical expenses overseas in relation to your spouse's illness which was carried out by a legally qualified medical practitioner. Therefore, the hospitalisation, medical treatment and drug expenses paid to the doctor and chemist are eligible medical expenses for medical expenses tax offset purposes.