Edited version of your private ruling

Authorisation Number: 1012525516876

Ruling

Subject: Net medical expenses tax offset

Question

Is your child considered a dependant for the purposes of the net medical expenses tax offset?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

Your child is aged over 21 years of age.

During the 2012-13 financial year your child was diagnosed with a serious illness. You incurred substantial medical expenses relating to the treatment of their illness.

Your child is now dependent on you both physically and financially.

During the 2012-13 financial year your child was in receipt of a disability support pension. They also received other income. Their adjusted taxable income for rebate purposes was greater than $282.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

Income Tax Assessment Act 1936 Section 159J

A New Tax System (Family Assistance) Act 1999 Schedule 3

Reasons for decision

Subsection 159P(3A) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a rebate is allowable to a taxpayer whose net medical expenses in the year of income exceed the threshold.

The expenses must be paid by a resident taxpayer in respect of themselves or their resident dependant/s. Subsection 159P(4) of the ITAA 1936 defines a dependant of the taxpayer as:

· their spouse

· their child under 21 years of age; or

· a person for whom the taxpayer can claim a dependent tax offset under section 159J of the ITAA 1936; being

· their invalid relative

· their parent; or

· their spouse's parent.

In your case, your child is aged over 21 years of age, so it must be determined whether you are eligible to claim a dependent tax offset in respect of your child under section 159J of the ITAA 1936.

Subsection 159J(6) of the ITAA 1936 defines an invalid relative as a child over 16 years of age, a brother or a sister of the taxpayer, or the taxpayer's spouse, who is being paid a disability support pension or a special needs disability support pension.

Your child is aged over 16 years, and is in receipt of a disability support pension. They are therefore considered a dependent invalid relative under subsection 159J(6) of the ITAA 1936.

Subsection 159J(4) of the ITAA 1936 states that the dependent tax offset is reduced by $1 for every $4 that the dependant's adjusted taxable income for rebates is greater than $282.

Schedule 3 to the A New Tax System (Family Assistance) Act 1999 defines adjusted taxable income for rebates as the total of the dependant's:

· taxable income

· adjusted fringe benefits

· target foreign income

· net investment loss

· tax free pensions and benefits; and

· reportable superannuation contributions.

In your case, your child's adjusted taxable income is greater than $282. The maximum dependent offset available for an invalid relative in the 2012-13 financial year is $770. Due to your child's adjusted taxable income for rebate purposes, your offset entitlement is calculated to be less than zero. You are therefore not eligible for a dependent tax offset.

As your child is aged over 21 years of age, and you are not eligible to claim a dependent tax offset in respect of them, they are not considered a dependant for the purposes of the net medical expenses tax offset. You therefore cannot claim a tax offset for medical expenses you have paid on their behalf.