Private ruling: Net medical expenses tax offset
Date of advice: 24 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Do your out-of-pocket expenses in relation to your gastric bypass procedure qualify for inclusion in the calculation of the medical expenses tax offset? | A1: No.

Relevant facts and circumstances: You have a medical condition which over time has limited your ability to walk. You experience pain in your leg which causes you to limp, and aggravate the condition. This was also the cause of a weight increase. You consulted a doctor who agreed that a gastric bypass would assist in weight loss, and eventually relieve the pain in your leg and foot. You applied for assistance, and underwent the gastric bypass procedure. The pain has now eased and you no longer limp. Without the surgery you would not have been able to continue to work full time. You paid for ongoing care from your doctor.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 159P(1) | Income Tax Assessment Act 1936 Paragraph 159P(1B)(a)

Reasons for decision: Summary: A medical expenses tax offset is available under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays eligible medical expenses in an income year for themselves or a dependant who is an Australian resident. The medical expenses tax offset is only available if the amount of medical expenses, after being reduced by any entitlement to reimbursement from a health fund or government authority such as Medicare or the National Disability Insurance scheme, exceeds the threshold amount. This tax offset is income tested. The percentage of net medical expenses you can claim and the threshold amount is determined by your adjusted taxable income (ATI) and family status. It should also be noted that the threshold amount is subject to indexation and will change in future income years. The net medical expenses tax offset is being phased out. From 2015-16 until 2018-19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care. Based on your circumstances paragraph 159P(1B)(a) of the ITAA 1936 would be the only provision where your expenses can be considered. This paragraph states:- 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 relates to an aid for a person with a disability. 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. Examples include wheelchairs, walking frames, hearing aids, car controls for the disabled and similar appliances. Whilst we accept that you underwent a surgical procedure to overcome a medical condition, this does not change the fact the payments were made to a hospital and legally qualified medical practitioner in relation to an operation and not an amount paid in relation to a disability aid. Therefore the costs involved with your operation are not considered to be eligible medical expenses for the purposes of the NMETO. Please note that the payment for ongoing care from your doctor is also not regarded as a payment for disability aids, attendant care or aged care and therefore does not qualify as a medical expense for the medical expense tax offset purposes.