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ATO Interpretative Decision

ATO ID 2003/954 (Withdrawn)

Income Tax
Medical expenses tax offset: reimbursement of medical expenses received as part of a compensation payment

Attention This ATO ID is withdrawn.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).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 11 August 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Is the taxpayer required to reduce their medical expenses by a reimbursement amount received as part of a compensation payment, when calculating the rebatable amount for the purposes of the medical expense tax offset under section 159P of the Income Tax assessment Act 1936 (ITAA 1936)?

Decision

No. The taxpayer is not required to reduce their medical expenses by this reimbursement amount when calculating the rebatable amount for the purposes of the medical expense tax offset under section 159P of the ITAA 1936, as it is not an amount received from a government, public authority, society, association or fund.

Facts

The taxpayer suffered health problems as a result of the negligence of another person.

The taxpayer incurred medical expenses as defined in subsection 159P(4) of the ITAA 1936 as a result of the medical treatment required in dealing with those health problems.

The taxpayer took legal action as a result of which they received a compensation payment from the defendant to that legal action. This compensation payment contained a quantified amount as reimbursement of the taxpayer's medical expenses.

The defendant to the legal action was not a government or public authority, nor were they a society, association or fund.

Reasons for Decision

A medical expense tax offset is available to a taxpayer under section 159P of the ITAA 1936 where the taxpayer incurs medical expenses for themselves or a dependant who is an Australian resident. Subsection 159P(3A) of the ITAA 1936 provides that the offset is allowable to a taxpayer whose 'rebatable amount' in the year exceeds $1,500.

Subsection 159P(1) of the ITAA 1936 provides that the 'rebatable amount' is the amount of medical expenses less any amount which the taxpayer is paid or is entitled to be paid by a government or public authority or a society, association or fund.

Subsection 159P(1) of the ITAA 1936 does not require the rebatable amount to be reduced where the payment is made to the taxpayer by a person or entity of a type other than those listed in that provision.

The taxpayer has received a payment, which included an amount for reimbursement of their medical expenses, from the defendant in a legal action. The defendant was not a government or public authority or a society, association or fund for the purposes of subsection 159P(1) of the ITAA 1936.

Therefore, the payment received by the taxpayer does not reduce the rebatable amount for the purposes of calculating their medical expenses tax offset under section 159P of the ITAA 1936.

Date of decision: 23 September 2003

Year of income:Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1936
   section 159P
   subsection 159P(1)
   subsection 159P(3A)
   subsection 159P(4)

Keywords
Compensation income
Damages income
Medical expenses
Medical expenses rebates
Personal injury awards

Siebel/TDMS Reference Number: 3771277;1-8EB6RL8

Business Line: Small Business/Individual Taxpayers

Date of publication: 24 October 2003

ISSN: 1445-2782

ATO ID 2003/954 (Withdrawn) history   Top  
   Date   Version 
   23 September 2003   Original statement   
 You are here ®  11 August 2017   Withdrawn   


 


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