Medical Expenses Tax Offset - herbal medication

Is the taxpayer entitled to claim the medical expenses tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) for expenses incurred in the purchase of herbal medication?

Yes. The taxpayer is entitled to claim the medical expenses offset under section 159P of the ITAA 1936 as the purchase of herbal medication qualifies as medical expenses.

The taxpayer's dependant suffers from a neurological disorder. The progress of the illness is monitored by a specialist medical practitioner.

The taxpayer incurred expenditure on herbal medication at the direction of the dependant's medical practitioner. All herbal medicines were purchased from a chemist.

The herbal medicines led to an improvement in the dependant's medical condition.

The amount of medical expenses incurred by the taxpayer, 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.

Medical expenses are defined in subsection 159P(4) of the ITAA 1936 to include payment to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation (paragraph (a) of the definition).

If however, medication was purchased from other outlets (for example, a health food store or supermarket), the expenses will only qualify as a medical expense if the treatment is therapeutic and administered by direction of a legally qualified medical practitioner (paragraph (d) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936).

For treatment to be regarded as being administered by direction of a legally qualified medical practitioner, the treatment needs to be advised, prescribed or ordered by a legally qualified medical practitioner. It also requires monitoring to some extent by the medical practitioner, or in some cases, self-monitoring.

Herbal medication was purchased by the taxpayer from a chemist for the purposes of treating an illness. The expenses fall within paragraph (a) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936. As the net medical expenses incurred by the taxpayer exceeded $1250, the taxpayer is entitled to the claim the medical expenses tax offset under section 159P of the ITAA 1936.