Edited version of your written advice

Authorisation Number: 1012823715137

Date of advice: 9 September 2015

Ruling

Subject: Medical expenses tax offset

Question

Can a taxpayer claim the medical expenses tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) for expenses incurred in administering therapeutic treatment where the treatment is not at the direction of a medical practitioner?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Your child was diagnosed with severe learning disorders. Following this diagnosis you sought treatment for these disorders. You were not referred to any specific practitioners for treatment. There are no programs within Australia which specifically treat one of the disorders.

You incurred expenses on therapeutic treatment and schooling in several programs overseas. These programs were recommended by psychologists and other educational and behavioural practitioners.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

Reasons for decision

Section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) provides for a rebate to a taxpayer whose net medical expenses in the year of income exceed the threshold amount specified in subsection 159P(3A) of the ITAA 1936.

Under subsection 159P(1) of the ITAA 1936, the expenses must be paid by a resident taxpayer in respect of themselves or their resident dependent. The taxpayer's child is a resident and is a dependant in accordance with subsection 159P(4) of the ITAA 1936.

Medical expenses are defined in subsection 159P(4) of the ITAA 1936.

Paragraph (a) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 provides that medical expenses 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 (d) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 provides that medical expenses include payments 'for therapeutic treatment administered by direction of a legally qualified medical practitioner'.

In order to qualify for the tax offset such payments must meet the following conditions:

(1)  they are for therapeutic treatment and

(2)  The therapeutic treatment is administered by direction of a legally qualified medical practitioner.

The general concept of therapeutic treatment is healing or curing rather than preventing the need for therapy ( Case T67 (1967) 18 TBRD 346; (1967) 14 CTBR (NS) Case 31 ).

In Case R95 84 ATC 633; (1984) 27 CTBR (NS) Case 148, the Board of Review found that therapeutic treatment necessitated the exercise of professional skill in the medical field. This would normally involve the person administering the treatment using chemical agents or drugs or some physical and mental processes which are directed towards the cure or management of disease or of diseased patients.

The Commissioner accepts that the various therapy and education programs undertaken are therapeutic treatment for the purposes of paragraph (d) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936.

The therapeutic treatment must be administered by direction of a legally qualified medical practitioner. In Case 9/2005, 2005 ATC 193, the question was addressed as to whether a psychologist was considered a "legally qualified medical practitioner". It was determined that to be accepted as a legally qualified medical practitioner, the practitioner must be qualified to practise medicine, which a psychiatrist is qualified to do but which a psychologist is not, even where the psychologist is registered. A psychologist is therefore not considered a "legally qualified medical practitioner".

Furthermore, a mere suggestion or recommendation by a doctor to a patient that the patient undergo therapeutic treatment is not enough for the associated expenses to qualify as medical expenses. The patient must be referred to a particular person for the therapeutic treatment (Case A53 69 ATC 313; (1969) 15 CTBR (NS) Case 30 ).

In your case, a legally qualified medical practitioner in the form of a paediatrician diagnosed your child with severe learning disorders. However, the paediatrician did not refer your child to treatment by a particular person, rather, you sought treatment yourself, and determined the programs that were undertaken were the most appropriate.

Although you have taken advice from experts in the treatment of learning disorders, none of these are considered "legally qualified medical practitioners". They are qualified as psychologists, behavioural therapists, education experts and the like, and, as per Case 9/2005, 2005 ATC 193 above, are not considered to be qualified to practise medicine. Accordingly, the therapies, courses and schooling were not administered by direction of a legally qualified medical practitioner. Consequently, you are not entitled to include the expenses incurred for the therapy as medical expenses for the purpose of the tax offset available under section 159P of the ITAA 1936.

ATO view documents

ATO Interpretive Decision ATO ID 2001/182

Other references (non ATO view)

Case A53 69 ATC 313; (1969) 15 CTBR (NS) Case 30

Case T67 (1967) 18 TBRD 346; (1967) 14 CTBR (NS) Case 31

Case 9/2005, 2005 ATC 193