Edited version of private ruling

Authorisation Number: 1011854246777

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Ruling

Subject: Medical expenses tax offset

Question and answers:

Do lodging fees paid to a hospital to allow your spouse to stay with you during the birth of your child qualify as a medical expense for the purpose of a medical expense tax offset?

Yes.

Do expenses incurred in purchasing a mechanical breast pump and sterilizer qualify as a medical expense for the purpose of a medical expense tax offset?

Yes.

Do the expenses incurred in purchasing the following qualify as a medical expense for the purpose of a medical expense tax offset:

· various ointments for treatment of infections

· saline spray

· heel cream

· fish oil supplements

· cream for stretch marks and cracked skin

· bruise cream

· a pregnancy and breastfeeding supplement?

Yes.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are a resident of Australia for income tax purposes.

You gave birth to a child.

You suffered from an illness.

Your child was born via caesarean and as a result you and they were required to be hospitalized for a number of nights.

As you suffered from an illness your spouse stayed at the hospital with you to provide invaluable support during the number of days that you were hospitalized. You were charged a fee per night by the hospital for your spouse's stay.

After your child was born you suffered a condition whereby you were unable to breastfeed your child. This condition continued for a considerable period of time.

To enable you to breastfeed your child you purchased a mechanical breast pump and sterilizer. These items were purchased from a chemist.

You have also purchased the following:

· various ointments - purchased for the treatment of infections;

· saline spray - purchased due to you having a cold/flu and not being able to take prescribed medicines;

· heel cream - purchased due to you having cracked heels;

· fish oil supplements - purchased to aid your pregnancy;

· cream - purchased for stretch marks and cracked skin;

· bruise cream - purchased for bruising;

· a pregnancy and breastfeeding supplement - insisted upon by both your obstetrician and general practitioner throughout and after your pregnancy.

All of the above items were purchased from a chemist in respect of your pregnancy and various illnesses that you have suffered.

You were not reimbursed for any of these expenses.

You have documentation to support your claims.

Your total medical expenses reduced by any reimbursements will exceed $2,000.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

Reasons for decision

A medical expense 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 only available if the amount of medical expenses (reduced by any entitlement to reimbursement from a health fund or government authority) exceeds $2,000 for the 2011 income year. The tax offset is 20% of the amount by which the net medical expenses exceeds $2,000.

Subsection 159P(4) of the ITAA 1936 defines dependant to mean:

· the spouse of the taxpayer

· a child of the taxpayer less than 21 years of age

· a person in respect of whom the taxpayer is entitled to a tax offset under section 159J, or

· a student or child less than 16 years of age who is not a student whom the taxpayer is entitled to a notional tax offset under section 159J.

Medical expenses are defined in subsection 159P(4) of the ITAA 1936 to include payments to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation (paragraph (a) of the definition).

Neither 'illness' nor 'operation' is defined in the ITAA 1936, nor are they defined in any other legislation relating to income tax. 'Illness' was discussed by Dr Gerber of the Taxation Board of Review No. 3 in Case Q21, 83 ATC 77. He said that the word 'includes any condition marked by a pronounced deviation from the normal healthy state' and 'any disorder of body, function or systems'.

It can be argued that pregnancy is a process in which the normal healthy state is markedly altered for the duration of and for some time after the pregnancy and particularly during childbirth. It is a condition which carries significant risk of morbidity and mortality, for both mother and child. As such, it is considered pregnancy and childbirth would be caught by the ordinary meaning of the term illness.

This is the view followed by the Commissioner in Income Tax Ruling IT 2359: Medical expenses - In Vitro Fertilization.

Payments made to hospital in respect to an illness or operation

The term 'medical expenses' as defined under subsection 159P(4) of the ITAA 1936, includes payments to a hospital in respect of 'an illness or operation'.

In your case, you have incurred hospital expenses in regards to your spouse staying with you after the birth of your child. They stayed with you as you had suffered from an illness, and their support was invaluable directly after your operation. Therefore these expenses are viewed as being incurred in respect of an illness.

Accordingly, as these expenses were incurred in respect of your spouse (who is taken to be your dependant under subsection 159(4) of the ITAA 1936), and have been paid to a hospital in respect of an illness, they qualify as a medical expense for the purpose of a medical expense tax offset, under section 159P(4) of the ITAA 1936.

Payments made to a chemist in respect of an illness

The term 'medical expenses' as defined under subsection 159P(4) of the ITAA 1936, includes payments to a chemist in respect of 'an illness or operation'.

In your case, you have incurred expenses in the purchase of a breast pump, sterilizer, various ointments, saline spray, heel cream, fish oil supplements, bruise cream, and a pregnancy and breast- feeding supplement that have been purchased in regards to your pregnancy and various illnesses that you have suffered. As these items were purchased from a chemist and in relation to an illness, they qualify as a medical expense for the purpose of a medical expense tax offset, under subsection 159P(4) of the ITAA 1936.

Accordingly, you are entitled to include the expenses incurred in purchasing the breast pump, sterilizer, various ointments, saline spray, heel cream, fish oil supplements, bruise cream, and a pregnancy and breastfeeding supplement that you have purchased from a chemist in relation to your pregnancy and various illnesses in your medical expense tax offset calculation, in the year they have been incurred, under subsection 159P(4) of the ITAA 1936.