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Ruling
Subject: Residential aged care expenses
Question
Do the fees you pay to the facility qualify as eligible medical expenses for the purposes of the medical expenses tax offset?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You reside in an apartment at a facility.
You have received an aged care assessment team (ACAT) assessment that you require low level care.
The facility provides low level care and is owned and operated by a registered nurse.
The facility is not an approved care provider under the Aged Care Act 1997.
Reasons for decision
Summary
Your payments to the facility are not considered to be payments to a hospital as the facility is not an approved care provider. Therefore, the expenses do not qualify as medical expenses for the purposes of the medical expenses tax offset.
Detailed reasoning
Section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a tax offset is allowable to a taxpayer whose net medical expenses (that is, medical expenses less any amount paid or payable by Medicare or any other fund) in the year of income exceed a certain threshold.
For the year ended 30 June 2012, the amount of the tax offset is 20% of the excess of net medical expenses over the threshold of $2,000.
To qualify for the tax offset, the medical expenses must be paid by a taxpayer who is an Australian resident, in respect of themselves, or in respect of a dependant.
The term medical expenses is defined in subsection 159P(4) of the ITAA 1936, and includes payments to a public or private hospital in respect of an illness or operation.
Hospital
As the term hospital is not defined for the purposes of section 159P of the ITAA 1936, reference is made to its ordinary meaning. The Macquarie Dictionary defines hospital as an institution in which sick or injured persons are given medical or surgical treatment.
Taxation Rulings IT 261 and TR 93/14 provide guidance on whether nursing homes and hostels for aged or disabled persons are hospitals for the purposes of subsection 159P(4) of the ITAA 1936, and state that nursing homes and hostels which are approved by the Government are considered to be hospitals.
TR 93/14, which discusses hostels for aged or disabled persons, states that approval by the Government is recognition that the hostel is capable of and does provide personal care services. To be approved, a hostel must be able to provide adequate accommodation and 'approved personal care services' to aged or disabled persons.
Under the Aged Care Act 1997, an aged care facility that is an approved provider is entitled to receive Commonwealth Government funding on the basis that it will provide medical treatment and care to residents, depending on the assessed level of care required. Therefore, an aged care facility that is an approved provider is considered to be a hospital for the purposes of subsection 159P(4) of the ITAA 1936.
Your case
You have been assessed as needing low level care, which is considered to be care in respect of an illness.
However, the facility where your reside is not an approved care provider, and is therefore not considered to be a hospital for the purposes of subsection 159P(4) of the ITAA 1936.
Your payments to the facility are not payments to a public or private hospital, and so do not qualify as medical expenses under subsection 159P(4) of the ITAA 1936. Therefore, your payments to the facility cannot be included in the calculation of a medical expenses tax offset.