ATO Interpretative Decision

ATO ID 2002/934 (Withdrawn)

Income Tax

• This ATO ID is withdrawn. Guidance on the Net Medical Expenses Tax Offset can be found at Medical expenses on the ATO website (QC 31918).
  This document has changed over time. View its history.

Issue

Do payments made by a taxpayer to a company for the provision of a carer qualify as medical expenses for the purposes of a medical expenses tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

Yes. Payments made by a taxpayer to a company for the provision of a carer qualify as medical expenses for the purposes of a medical expenses tax offset under section 159P of the ITAA 1936.

Facts

The taxpayer is permanently confined to a wheelchair.

The taxpayer makes payments to a company for the provision of a carer.

Carers provided by the company are not legally qualified as medical practitioners or nurses.

The company pays the wages of the carers from the payments received from the taxpayer after deducting its administrative costs.

Reasons for Decision

Section 159P of the ITAA 1936 provides that a rebate of tax (tax offset) is allowable to a taxpayer whose net medical expenses in the year of income exceed a threshold dollar amount specified in the legislation.

The term 'medical expenses' is defined in subsection 159P(4) of the ITAA 1936. It includes payments made 'as remuneration of a person for services rendered by him or her as an attendant of a person who is blind or permanently confined to a bed or an invalid chair' (paragraph 159P(4)(h) of the ITAA 1936).

In order to qualify as a medical expense, paragraph 159P(4)(h) of the ITAA 1936 does not require that the payment be made to a specific person but rather that it be paid 'as remuneration of a person' for services the person provides as an attendant. There is no requirement therefore that the payment be made directly to the person who provides the care.

Where payment by the taxpayer is made to an entity other than the carer, the only amount which will qualify for the tax offset is the amount that represents the remuneration (for example wages) of a person for providing services as an attendant or carer.

Where an entity other than the carer receives the taxpayer's payment and then deducts an amount for its administration costs, those administration costs are not remuneration of the person for providing services as an attendant or carer and will therefore not qualify as medical expenses.

This interpretation has been supported in the Small Taxation Claims Tribunal, in [2001] AATA 944 (Unreported, Senior Member MD Allen, 15 November 2001). In that case the Tribunal allowed a taxpayer a medical expenses tax offset in respect of expenses paid to a company that provided carers. The rebatable amount only included payments actually made by the company to the carers. The portion of the expenses that was retained by the company for administrative services was not included as part of the rebatable amount.

Accordingly, payments made by the taxpayer to a company for the provision of a carer qualify as medical expenses for the purposes of the medical expenses tax offset to the extent that the payments represent remuneration of a person for providing services as an attendant or a carer.

Amendment History

Year of income:  Year ended 30 June 2001 Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1936
   section 159P
   subsection 159P(1B)
   paragraph 159P(4)(h)

Case References:
[2001] AATA 944
   (Unreported, Senior Member MD Allen, 15 November 2001)

ATO Interpretative Decisions overturned by this decision
ATO ID 2001/29
ATO ID 2001/480

Business Line:  Small Business/Individual Taxpayers

Date of publication:  30 September 2002

ISSN: 1445-2782