Medical Expenses Tax Offset - medical expenses paid for disabled relative

Is a taxpayer entitled to a medical expenses tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) for medical expenses incurred for a disabled relative?

No. The taxpayer is not entitled to a medical expenses tax offset under section 159P of the ITAA 1936 as the taxpayer's disabled relative is not a dependant for the purposes of section 159P of the ITAA 1936.

The taxpayer's disabled relative is in receipt of a disability support pension which exceeds the cut-out threshold for an invalid relative tax offset.

The taxpayer provides additional financial support and maintenance for the relative, including the purchase of medicines and medical appliances, as the pension does not cover all of the relative's needs.

The amount of medical expenses incurred by the taxpayer for the invalid relative, after reimbursements from Medicare and health fund, exceeded $1250.

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. The medical expense tax offset is only available if the amount of medical expenses (reduced by any entitlement to reimbursement from a health fund or government authority) exceeds $1250. The tax offset is 20% of the amount by which the net medical expenses exceeds $1250.

Subsection 159P(4) of the ITAA 1936 defines dependant to mean: • the spouse of the taxpayer; • a child of the taxpayer less than 21 years of age; • a person in respect of whom the taxpayer is entitled to a tax offset under section 159J; or • a student or child less than 16 years of age who is not a student whom the taxpayer is entitled to a notional tax offset under section 159J.

Section 159J of the ITAA 1936 allows a dependant tax offset where a resident taxpayer contributes to the maintenance of an invalid relative, if the relative's separate net income does not exceed the cut-out threshold.

The invalid relative's separate net income exceeds the cut-out threshold to entitle the taxpayer to an invalid relative tax offset. The relative is therefore not a dependant for the purposes of section 159P of the ITAA 1936. Accordingly, expenses incurred by the taxpayer for the relative are not medical expenses of the taxpayer or a dependant of the taxpayer and a medical expense tax offset is therefore not allowable under section 159P of the ITAA 1936.