Edited version of private advice

Authorisation Number: 1012640543868

Ruling

Subject: Medical expenses tax offset

Question

Can you include the cost of nursing home expenses in a calculation for a medical expenses tax offset (METO)?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

You did not claim a medical expenses tax offset for the 2012-13 financial year.

Your spouse went into high level care in a nursing home that is approved under the Aged Care Act 1997 (ACA 1997) during the 2013-14 financial year.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

Reasons for decision

A medical expenses tax offset is available to a taxpayer under sub-section 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays medical expenses in an income year for themselves or a dependant who is an Australian resident to the extent that they are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund.

The term 'medical expenses' is defined in sub-section 159P(4) of the ITAA 1936. Paragraph (a) of the definition includes payments made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation. Paragraph (h) includes remuneration of a person for services rendered by them as an attendant of a person who is blind or permanently confined to a bed or an invalid chair.

The payment to the aged care facility must be in respect of an illness or operation. The payment will be accepted as being in respect of an illness if the taxpayer is an 'approved care recipient' under the ACA 1997. An 'approved care recipient' is a person who has been assessed as requiring care at levels 1 to 7 (Taxation Ruling TR 93/14).

Medical expenses also include payments made to a public or private hospital in respect of an illness. An aged care facility that is an approved provider under the ACA 1997 is considered to be a hospital for the purposes of subsection 159P(4) of the ITAA 1936.

On 14 May 2013, the government announced in the 2013-14 Budget that it will phase out the net METO.

From 1 July 2013, those taxpayers who received the offset in their 2012-13 income tax assessment will continue to be eligible for the offset for the 2013-14 income year if they have eligible out-of-pocket medical expenses above the relevant claim threshold. Similarly, those who receive the tax offset in their 2013-14 income tax assessment will continue to be eligible for the offset in 2014-15.

The changes mentioned above will not apply to all taxpayers - the offset will continue to be available for taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019.

For the 2013-14 to 2018-19 financial years, an amount that would otherwise be paid as medical expenses is treated as not being paid as medical expenses unless the payment:

(a) relates to an aid for a person with a disability; or

(b) relates to services rendered by a person as an attendant of a person with a disability; or

(c) relates to care provided by an approved provider (within the meaning of the ACA 1997) of a person who:

(i) is approved as a care recipient under that Act; or

(ii) is a continuing care recipient within the meaning of that Act.

In your case, your spouse is assessed as high level care in a facility approved under the ACA 1997. Therefore, you can include the expenses relating to your spouse's care in the nursing home as eligible expenses for the purpose of claiming the METO.