Medical Expense Tax Offset: expenses paid from a joint bank account

Is a taxpayer entitled to a medical expense tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) for medical expenses paid from a joint bank account?

Yes. A taxpayer is entitled to a medical expense tax offset under section 159P of the ITAA 1936 for medical expenses paid from a joint bank account, but only to the extent of their beneficial ownership of the bank account.

The taxpayer incurred medical expenses in excess of $1500.

The expenses were paid from a bank account held jointly with their spouse.

All funds in the bank account were deposited by the taxpayer as they were the sole income earner.

All the expenses were paid in the year of income.

The taxpayer received no reimbursement from a government, public authority, society, association or fund.

Subsection 159P(1) of the ITAA 1936 states: An amount paid by the taxpayer in the year of income as medical expenses in respect of himself, or in respect of a dependant who is a resident, less any amount paid to the taxpayer or any other person, and any amount which the taxpayer or any other person is entitled to be paid, in respect of those medical expenses by a government or public authority or by a society, association or fund (whether incorporated or not) shall, for the purposes of this section, be treated as a rebatable amount in respect of that year of income.

There is a general presumption that holders of a joint account have joint beneficial ownership of the moneys in equal share (Tanumihardjo v. FC of T 97 ATC 4817; (1997) 36 ATR 400). This presumption can be rebutted by evidence to the contrary (see Case Z7 92 ATC 131; AAT Case 7675 (1991) 22 ATR 3591).

In this case the taxpayer has shown that the entire amount deposited in the account was derived from their income. No amount was deposited by their spouse. As such, it is accepted that the taxpayer has the beneficial ownership of the funds.

As such, the taxpayer is entitled to the entire medical expense tax offset under section 159P of the ITAA 1936.

It should be noted that if the taxpayer was unable to show to whom the funds in the account belonged they would only be entitled to 50% of the tax offset.