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

No. To qualify for a medical expenses tax offset under section 159P of the ITAA 1936, the payments for a carer must, amongst other things, be paid directly to the carer as remuneration for his or her services.

The taxpayer's dependant is confined to a wheel chair. The taxpayer, who is physically unable to lift or move the dependant, hires a carer for 4-5 days per week to help care for the dependant.

The carer is provided by a company and the taxpayer pays the company for the provision of the carer.

Section 159P of the ITAA 1936 allows a tax offset for certain net 'medical expenses' that a taxpayer may pay during a year of income. These monies must be paid in respect of the taxpayer or a dependant who is an Australian resident.

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

This can be contrasted with the situation of a legally qualified medical practitioner, nurse or chemist where the definition of medical expense is specifically expanded in subsection 159P(5) to include a payment to the employer of such a person. The definition of medical expense has also been specifically expanded by subsections 159P(6) and (7) to include payments to employers of legally qualified dentists and registered dental mechanics. The definition of medical expense has not been expanded to include the employer of an attendant.

The issue of the requirement for a payment to be made to an individual for services performed by that individual as an attendant was considered in Case K30 78 ATC 284; (1978) 22 CTBR(NS) Case 50 and in Case S57 85 ATC 412; (1985) 28 CTBR(NS) Case 63. The Board of Review in both cases held that the payment can only be allowed when paid to a natural person for services rendered by that person while attending an incapacitated taxpayer and that the definition could not be interpreted to cover payments made to a statutory person in the form of a corporation or association.

The payments made to a company by the taxpayer for the provision of a carer for their dependant, do not fall within the definition of 'medical expenses' in section 159P of the ITAA 1997. The taxpayer is therefore not entitled to a medical expenses tax offset for payments made to that company.