14 July 2004 Internal T.I. 2004-0083531I7 - Medical expenses - Ontario Health Premium

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Does the payment of the Ontario Health Premium, as introduced in the May 18, 2004 Ontario Budget qualify as a medical expense?

Position: No.

Reasons: The Ontario Health Premium is a tax assessed under the Ontario Income Tax Act.

		July 14, 2004

	Jacinthe Dubé	HEADQUARTERS
	Client Services Division	Bob Naufal, CMA
	Assessment and Collections Branch
	750 Heron Road, 7th Floor 

		2004-008353

Ontario Health Premium

We are writing in response to your email of June 29, 2004, wherein you asked us if the new Ontario Health Premium (the "Premium") qualifies as a medical expense for purposes of the medical expense tax credit.

The Premium was introduced in the Ontario Budget presented on May 18, 2004 as a new tax on individuals under the Income Tax Act (Ontario) (the "Ontario Income Tax Act"). The Premium is to be collected through the income tax system, as administered by the Canada Revenue Agency under the existing Tax Collection Agreement between the Province of Ontario and the Federal government. The revenues raised from the Premium will be invested in the Ontario health care system. On June 21, 2004, the Ontario Government introduced Bill 106, which contains the legislative amendments to the Ontario Income Tax Act to implement the Premium. The proposed amendments to the Ontario Income Tax Act confirms that the Premium is a tax imposed on individuals resident in Ontario on the last day of a particular taxation year.

Our comments

Subsection 118.2(2) of the Income Tax Act (Canada) (the "Act") provides a list of expenditures that qualify as medical expenses. Qualifying medical expenses, as defined in subsection 118.2(2) of the Act, include a premium, contribution or other consideration paid under a "private health services plan" ("PHSP"), which is defined in subsection 248(1) of the Act. A PHSP is defined as a contract of insurance in respect of hospital expenses, medical expenses or any combination of such expenses, or a medical care insurance plan or hospital care insurance plan or any combination of such plans.

Paragraph (c) of the definition of "private health services plan" excludes, among other things, a plan created by, or pursuant to a law of a province that establishes a "health care insurance plan" as defined in section 2 of the Canada Health Act. In this regard, section 2 of the Canada Health Act defines a "health care insurance plan" as a plan established by the law of the province to provide for insured health services. Insured health services generally means hospital, physician, and surgical-dental services provided to insured persons.

Based on our review of the proposed legislative amendments to the Ontario Income Tax Act with respect to the Premium, it is our view that the Premium established under the proposed amendments does not represent consideration paid under a PHSP, but is a tax imposed under the Ontario Income Tax Act. As a result, the payment of the Premium will not qualify as a contribution to a PHSP and, accordingly, will not be a qualifying medical expense for purposes of the medical expense tax credit.

Moreover, even if the Premium represented consideration paid under a contract of insurance, it is our view that such a premium would still not qualify for the medical expense tax credit. The provincial health insurance plan would be excluded from the definition of PHSP, because of the exception contained in paragraph (c) of that definition.

We trust our comments will be of some assistance.

Yours truly,

Wayne Antle, CGA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate