Private ruling: Medial expenses tax offset - mobility modifications
Published: May 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Does the entire cost of the modifications made to your home qualify as an eligible medical expense for the purposes of the medical expenses tax offset? | A1: No. | Q2: Do the following out-of-pocket costs associated with modifying your home qualify as eligible medical expenses for the medical expenses tax offset? • purchase and installation of the lift • purchase and installation of the grab rails in the bathroom

Relevant facts and circumstances: You and your spouse are Australian residents for tax purposes. Your dependant has been diagnosed with a condition and as a result, is mobility impaired and unable to access parts of your home without being physically carried. Your dependant's health and development is monitored by a hospital and they are under the care of a specialist. You were referred by the hospital to an occupational therapist to assess your dependant's mobility/safety needs within the home. The following access modifications were prescribed:- • modifications within the home to provide wheelchair/walker assess to the principal areas of the home • modifications to the front and back entrances of the house to enable access to the backyard and independent entry and exit from the home. The building modifications were organised by a government organisation and you have received financial assistance through a government program. The lift which was supplied is manufactured and sold for disability access only. Some of the fixtures that were fitted are manufactured and distributed as aids to the function or capacity of a person with a disability or illness. You have out of pocket costs in relation to the modifications.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1936 Subsection 159P(1) | Income Tax Assessment Act 1936 Subsection 159P(4) | Income Tax Assessment Act 1936 Paragraph 159P(4)(f)

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, exceeds the threshold amount. This includes any financial assistance received under a government or not-for-profit funded program. The amount of net medical expenses tax offset you can claim now depends on your level of income as the rebate is now income tested. This not only affects the threshold amount but also the percentage of the rebate you can claim. It should also be noted that the threshold amount is subject to indexation and will change in future income years. Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the medical expenses tax offset. Paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner. Taxation Ruling TR 93/34 Income tax: medical expense rebate - meaning of medical or surgical appliance explains the meaning of a 'medical or surgical appliance' as being an instrument, apparatus or device which is manufactured, distributed or generally recognised as an aid to the function or capacity of a person with a disability or an illness. TR 93/34 also provides that generally a household or commercial appliance is not a 'medical or surgical appliance' and that we need to look at the character of the appliance, not the purpose for which it is prescribed or used. It is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends. Lift The lift has been manufactured, is sold specially and is generally recognised as an aid to those people who have mobility impairment. Its character is to aid a mobility impaired person overcome obstacles such as staircases. The purchase and use of the lift was prescribed by your legally qualified medical practitioner to aid your dependant's mobility within your home. The lift meets the requirements of a 'medical or surgical appliance'. However, the costs attributed to the building alterations done in conjunction with the installation of the lift are separate and distinct from the purchase and installation costs. Building alterations are not considered to be medical expenses for the purpose of the medical expenses tax offset. Therefore, you can only include your out-of-pocket cost for the purchase and installation of the lift in your calculation of the medical expenses tax offset. Bathroom modifications You have paid for bathroom modifications that have been made to assist with your dependant's ability to bath and improve their ease of mobility throughout this area. Although these bathroom modifications are required due to your dependant's medical condition, they have a general domestic or household purpose. Building alteration expenses are not payments for an instrument, apparatus or device recognised as an aid to the function or capacity of a disabled person. Therefore, the modifications to your bathroom are not considered medical or surgical appliances for the purposes of paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936. Accordingly the out-of-pocket costs you have paid in relation to the bathroom modifications are not eligible medical expenses. However; you did have out-of-pocket costs for some fixtures that are manufactured and distributed as aids to the function or capacity of a person with a disability or illness. Due to the purpose of the grab rails, the portion of your out-of-pocket cost that relates to the purchase and installation of these items are considered to be a payment in respect of a medical or surgical appliance and is an eligible expense for a the purposes of the medical expense tax offset. It should be noted that while no breakdown of costs were provided to you in relation to the grab rails the Commissioner will accept an apportionment of expenses made on a fair and reasonable basis Widening of downstairs doorways and building of wheelchair ramps at the entranceways of the property The mobility access changes to the downstairs doorways and entranceways of the property have been made to allow wheelchair/walker access and improve your dependant's ease of mobility thought out the downstairs areas of your home as well as allowing them to independently access and exit the house from the front and back of the property. Paragraph nine of TR 93/34 provides a list of examples of what is not considered to be a medical or surgical appliance. Listed among them are wheelchair ramps. Although these modifications are required due to your dependant's medical condition, they have a general domestic or household purpose. As previously mentioned, building alteration expenses are not payments for an instrument, apparatus or device recognised as an aid to the function or capacity of a disabled person. Therefore, the building modifications in relation to the widening of the downstairs doorways, building of the wheelchair ramps at the entranceways of the property are not considered to be an eligible medical expense for the purposes of the medical expense tax offset and you are not entitled to include your out-of-pocket costs in your calculation of the medical expenses tax offset