Edited version of private ruling

Authorisation Number: 1011730306567

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Ruling

Subject: Medical expense tax offset

Question 1

Are you entitled to include Daily Care Fee payments made to an approved aged care facility in a calculation for a medical expenses tax offset?

Answer

Yes.

Question 2

Are you entitled to include Income Tested Fee payments made to an approved aged care facility in a calculation for a medical expenses tax offset?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commences on:

1 July 2007

Relevant facts and circumstances

You are an Australian resident for tax purposes.

You require full-time care. 

You are a resident at an aged care facility.

You have been assessed as requiring care at level 2.

You pay both daily care fees, and income tested fees.

Both daily care fees and income tested fees contribute to the cost of care.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Detailed reasoning

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 for themselves or a dependant who is an Australian resident. The medical expense tax offset is available if the amount of medical expenses (reduced by any entitlement to reimbursement from a health fund or government authority) exceeds $1,500. 

The medical expenses tax offset is 20% of the amount by which the net medical expenses exceed $1,500 for the income year. 

Subsection 159P(4) of the ITAA 1936 defines medical expenses to include payments made to a public or private hospital in respect of an illness or operation.

An aged care facility or nursing home will be regarded as a hospital for the purposes of subsection 159P(4) of the ITAA 1936 if it provides care to patients who have a continuing need for nursing care because of an illness, disease, incapacity or disability (Taxation Ruling IT 261). Your nursing home is an aged care facility that provides such care as it is able to provide care at the levels 1 to 7.

To be rebatable, the payment to the hospital (in this case, the aged care facility) must be in respect of an illness or operation. Whether or not the payment is in respect of an illness or operation depends on the level of care received. It is accepted that payments for those who require care at the level 2 or require personal care services (as opposed to only hostel care services) are in respect to an illness or operation.

In your case, as you have been medically assessed to require ongoing care at level 2, the payments you made to the approved aged care facility for your care qualify as a medical expense.

Therefore, you are entitled to a medical expenses tax offset under subsection 159P (1) of the ITAA 1936 for 20% of the amount by which your net medical expenses exceed $1,500 in each income year.