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Is a taxpayer required to reduce their medical expenses by reimbursements received for those expenses from an overseas health insurance fund when calculating their entitlement to a medical expense tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. For medical expense tax offset purposes, an overseas health insurance fund is a fund, society or association whose payments reduce the amount of medical expenses available for the tax offset.

The taxpayer is a member of an overseas health insurance fund.

The fund is based overseas and is not a registered fund for the purposes of claiming a private health insurance tax offset. Furthermore, the fund does not provide the hospital cover required to avoid paying the Medicare levy surcharge.

The overseas health insurance fund partially reimbursed the taxpayer for the medical expenses incurred.

Subsection 159P(3A) of the ITAA 1936 provides that a taxpayer is entitled to a rebate of tax (tax offset) in respect of rebatable medical expense amounts applicable to the taxpayer in respect of the year.

A rebatable medical expense amount is the amount of medical expenses incurred in respect of the taxpayer or a resident dependant of the taxpayer net of any amount recovered.

Subsection 159P(1) of the ITAA 1936 provides that any amount which the taxpayer or any other person is entitled to be paid by a government or public authority, or a society, association or fund must reduce the amount of the medical expenses for the purposes of calculating the tax offset.

Subsection 159P(1) of the ITAA 1936, does not require that the authority, society, association or fund be a resident of Australia.

The taxpayer incurred medical expenses and was entitled to reimbursement from an overseas health insurance fund. The taxpayer is required to reduce the amount of the medical expenses by the reimbursement for the purposes of calculating their entitlement to the medical expense tax offset under section 159P of the ITAA 1936.

Date of Amendment Part Comment 17 October 2014 Note Amend to alert to changes in NMETO from 1 July 2012 Facts Remove reference to old threshold amount Reasons for Decision Amend explanation to generic terms for clarity 6 March 2010 Title Convert to lower case Reasons for Decision Update terminology to 'tax offset'; adjust text to allow for changes in threshold amount

Date of Amendment | Part | Comment

17 October 2014 | Note | Amend to alert to changes in NMETO from 1 July 2012

Facts | Remove reference to old threshold amount

Reasons for Decision | Amend explanation to generic terms for clarity

6 March 2010 | Title | Convert to lower case

Reasons for Decision | Update terminology to 'tax offset'; adjust text to allow for changes in threshold amount