Private ruling: Medical expenses
Date of advice: 17 November 2016
Published: March 2017
Ruling period: Year ended 30 June 201X
Date scheme commenced: 1 July 201X

Ruling: Q1: Do your out-of-pocket expenses in relation to your medical procedure qualify for inclusion in the calculation of the medical expenses tax offset? | A1: No. | Q2: Do the costs of your medication and other treatment for your specific illness qualify for inclusion in the calculation of the medical expenses tax offset? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1936 Paragraph 159P(1B)(a) Detailed reasoning | A medical expenses tax offset is available under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) where you pay certain medical expenses in an income year for yourself or a dependant who is an Australian resident, to the extent that you are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund. Under changes to the legislation, the medical expenses tax offset is being phased out. | Subsection 159P(1B) of the ITAA 1936 states that: | For the 2013-14 to 2018-19 years of income, an amount that would otherwise be paid as medical expenses is treated as not being paid as medical expenses unless the payment: | (a) relates to an aid for a person with a disability; or | (b) relates to services rendered by a person as an attendant of a person with a disability; or | (c) relates to care provided by an approved provider (within the meaning of the Aged Care Act 1997 ) of a person who: | (i) is approved as a care recipient under that Act; or | (ii) is a continuing care recipient within the meaning of that Act. The above paragraph 159P(1B)(a) is relevant in your circumstances. | As highlighted in the Explanatory Memorandum to the amending legislation ( Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014) , whether an expense is related to a disability aid will largely be a matter of fact and circumstance. The concept of a 'disability aid', for the purpose of these amendments, is intended to mean an instrument, apparatus or device that is manufactured as, distributed as, or generally recognised to be, an aid to the function or capacity of a person with a disability. As the term 'disability' is not currently defined in the tax legislation, the definition published by the Australian Institute of Health and Welfare is relevant and states that a disability is defined as 'one or more of 17 limitations, restrictions or impairments which have lasted or are likely to last, for a period of six months or more, and which restrict a person's everyday activities'. They include: | ● chronic or recurrent pain or discomfort causing restriction; | ● restriction in physical activities or in doing physical work; | ● mental illness or condition requiring help or supervision; | It is acknowledged that you have a disability as defined above. Therefore it is now necessary to determine if your expenses relate to an aid. | Disability aids | A disability aid would be considered to be an 'aid to function or capacity' if it helps a person in performing activities of daily living or provides assistance to alleviate the effect of the disability. Examples include wheelchairs and walking frames. | Disability aids are items of property manufactured as, distributed as, or generally recognised to be, an aid to the function or capacity of a person with a disability but, generally will not include ordinary household or commercial appliances. | Whilst we accept that there were specific devices used in your major surgery, the payments made were not in relation to a disability aid. Rather the payments were made to a hospital and legally qualified medical practitioner in relation to an operation. A payment to a hospital or a doctor is not considered to be a payment for an aid for section 159P of the ITAA 1936 purposes. | Similarly, even though your medical professional may use equipment to help with your treatment, the payments you make to the medical professional are not regarded as a payment for an aid. | Furthermore, even though the operation and treatment may help you to function and to perform day to day activities, the associated costs are not regarded as being for an aid. The same can be said for your various medications. Although they may relate to your medical illness, they are not regarded as expenses being paid for an aid. | Therefore the costs involved with your operation, medication or treatment by medical professionals are not considered to be aids and are not eligible medical expenses for the purposes of calculating your medical expenses tax offset.


Relevant facts: You are an Australian resident for tax purposes. | You have had specific illnesses for many years. | You previously had major surgery. | There was a restriction in your physical activities. You were no longer able to do daily tasks and have been unable to participate in paid work for a few years. | You had received treatment and medication, however you were still restricted. | You had specific major surgery. | You incurred costs leading up to and following this procedure. Your expenses were paid to medical professionals. You doctor referred you to the various specialists. | The medical professional uses equipment that has been an aid to improving your functional capacity and your disabilities. | Since having the major surgery your functional capacity and quality of life has improved. | You have many out-of-pocket expenses in relation to medical procedure.