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Ruling
Subject: Eligibility of medical expense for medical expenses tax offset
Question and Answer:
Do the nursing home fees you incurred qualify as medical expenses for the purpose of the medical expenses tax offset.
Yes.
This ruling applies for the following period:
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
The scheme commenced on:
1 July 2008
Relevant facts:
You are an Australian resident for income tax purposes.
You are elderly and have been a permanent resident at a residential care facility for several years.
The nursing home is a registered facility under the Aged Care Act 1977.
You receive daily assistance with personal hygiene and require daily nursing care.
The Commonwealth Government pays a personal care subsidy under the Aged or Disabled Persons Homes Act in respect of you and this subsidy has been paid for the tax years that are the subject of this ruling.
You paid daily care fees.
None of these expenses were available for reimbursement and you have documentary evidence for the expenses to support your claim.
Relevant legislative provisions:
Income Tax Assessment Act 1936 Section 159P.
Income Tax Assessment Act 1936 Section 159P(4).
Reasons for decision
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 2011, the amount of the tax offset is 20% of the excess of net medical expenses over the threshold of $2,000, and for the years ended 30 June 2009 and 30 June 2010 the amount of the tax offset is 20% of the excess of net medical expenses over the threshold of $1,500.
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.
Is the aged care facility a '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.
Income Taxation Ruling IT 261 Fees paid to Nursing Homes - Whether Payments to a Hospital and Taxation Ruling TR 93/14 Income tax: medical expenses rebate - fees paid to a hostel for aged or disabled persons 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.
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.
In your case, as your nursing home Grove is an approved aged care facility, it is considered to be a hospital for the purposes of subsection 159P(4) of the ITAA 1936.
Are your payments in respect of an 'illness or operation'?
Paragraphs 4 and 5 of TR 93/14 state:
Whether fees paid to a hostel approved under the Aged or Disabled Persons Homes Act qualify for the medical expenses rebate depends on the type of subsidy paid by the Commonwealth Government to the hostel in respect of the particular hostel resident.
If the Commonwealth Government pays a personal care subsidy in respect of the hostel resident, the fees qualify for the medical expenses rebate…. In these circumstances, we accept both that the payment is to a hospital and that it is in respect of an illness or operation.
In your case, the Commonwealth Government pays a personal care subsidy under the Aged or Disabled Persons Homes Act in respect of you to your aged care facility. Accordingly, we consider that the fees paid by you qualify as eligible expenses for the purposes of the medical expenses tax offset as they are paid 'in respect of an illness or operation'.
Conclusion
As you have paid fees to an aged care facility considered to be a hospital in respect of your illness or operation, you are entitled to include these fees as eligible medical expenses for the purposes of the medical expenses tax offset.