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

Ruling: Q1: Does the mastectomy bra purchased for your spouse qualify for inclusion in the calculation of the net medical expenses tax offset? | A1: Yes | Q2: Does the ankle foot orthotics your child purchased for your spouse qualify for inclusion in the calculation of the net medical expenses tax offset? | A2: No | Q3: Do the shoes you purchased for your spouse qualify for inclusion in the calculation of the net medical expenses tax offset? | A3: No | Q4: Does the recliner lift chair purchased for your spouse qualify for inclusion in the calculation of the net medical expenses tax offset? | A4: No | Q5: Do the expenses you incurred in caring for your spouse qualify as attendant care expenses to be included in the calculation of the net medical expenses tax offset? | A5: No

Relevant facts and circumstances: You are an Australian resident for tax purposes. You paid for medical expenses in relation to your spouse who is also an Australian resident for taxation purposes. Your spouse had a double mastectomy surgery. Your spouse was diagnosed with a medical condition. Due to your spouse’s medical condition they consulted an orthotic specialist. The orthotic specialist recommended the purchase of ankle foot orthotics and supportive footwear or shoes that could possibly assist with your spouse’s mobility. The orthotic specialist recommended supportive footwear with deep and wide toe box, an appropriate shoe length, lace-up or Velcro fastening, removable insole, low heel height, non-slip sole and wide heel. During the 2017 income year you incurred expenditure on the following items: ● Shoes for $XX as per the invoice from a footwear retailer provided ● A Mastectomy bra for $XX as per the invoice from the prosthesis fitting specialist provided ● A recliner lift chair for $XX as per the invoice from the store provided You purchased the shoes from a footwear retailer. The footwear retailer is an athletic footwear specialty store. They do not specialise in surgical or medical footwear. The supportive footwear or shoes that you purchased were not specifically made for your spouse, but are available to the general public to buy from the store. You purchased the mastectomy bra from a prosthesis fitting specialist. The mastectomy bra is specifically designed with a pocket to hold prostheses. You stated that your child gave you the money to buy the ankle foot orthotics for which you cannot provide a receipt. You incurred expenses to provide care for your spouse. Your spouse is not blind or permanently confined to a bed or a wheelchair.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 159P | Income Tax Assessment Act 1936 subsection 159P(1B) | Income Tax Assessment Act 1936 subsection 159P(1) | Income Tax Assessment Act 1936 subsection 159P(4)

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 net 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. To qualify for the tax offset, the medical expenses must be paid by a taxpayer who is an Australian resident, in respect of themselves, or in respect of a dependant who is also a resident. The net medical expenses tax offset is being phased out. From 2013-14 until 2018-19 years of income, claims for this offset are restricted to net eligible medical expenses for disability aids, attendant care or aged care only. The term medical expenses is defined in subsection 159P(4) of the ITAA 1936. In your case, the most relevant part of this definition is paragraph 159P(4)(f) of the ITAA 1936, which includes payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner. The term medical expense is also defined in paragraph 159P(4)(h) of the ITAA 1936 to include payments made as remuneration of a person for services rendered by them as an attendant of a person who is blind or permanently confined to a bed or an invalid chair | Detailed Reasoning - Disability aids: Based on your circumstances, paragraph 159P(1B)(a) of the ITAA 1936 would be the only provision where your expenses can be considered. Paragraph 159P(1B)(a) 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 relates to an aid for a person with a disability. As highlighted in the Explanatory Memorandum to the amending legislation, whether an expense is related to disability aids will largely be a matter of fact and circumstances. 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. To be an aid to function or capacity, the item must help the person with the illness or disability to perform the activities of daily living. An item that merely has a therapeutic purpose, such as relieving, healing or preventing a medical condition, is not considered to be a medical or surgical appliance within the meaning of paragraph 159P(4)(f) of the ITAA 1936. The definition looks to the character of the appliance, not the purpose for which it is prescribe or used. Taxation Ruling TR 93/34 Income tax: medical expense rebate – meaning of medical or surgical appliance states that it is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends. | Detailed Reasoning - Disability: As it is not currently defined in tax laws, we refer to the definition published by the Australian Institute of Health and Welfare, which is: 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: ● loss of sight (not corrected by glasses or contact lenses); ● loss of hearing where communication is restricted, or an aid to assist with, or substitute for, hearing is used; ● speech difficulties; ● chronic or recurrent pain or discomfort causing restriction; ● shortness of breath or breathing difficulties causing restriction; ● blackout, fits, or loss of consciousness; ● difficulty learning or understanding; ● incomplete use of arms or fingers; ● difficulty learning or understanding; ● incomplete use of feet or legs; ● nervous or emotional condition causing restriction; ● restriction in physical activities or in doing physical work; ● disfigurement or deformity; ● mental illness or condition requiring help or supervision; ● long-term effects of head injury, stroke or other brain damage causing restriction; ● receiving treatment or medication for any other long-term condition or ailment, and still restricted; ● any other long-term condition resulting in a restriction. The ATO accepts the interpretation of disability and disability aids as described in the information above. | Detailed Reasoning - Prescribed by a legally qualified medical practitioner: An appliance can be regarded as being prescribed by a medical practitioner if they recommend its use; there is no need for that recommendation to be in writing (Case L62 79 ATC 490; (1979) 23 CTBR (NS) Case 72). | Detailed Reasoning - Your spouse’s disabilities: Your spouse has undergone a double mastectomy, resulting in deformity, and also suffers from a medical condition resulting in chronic or recurrent pain or discomfort causing restriction. Therefore, their conditions are considered to be disabilities in line with the definition published by the Australian Institute of Health and Welfare for the purposes of calculating the net medical expenses tax offset. | Detailed Reasoning - Mastectomy bra and orthotics: The mastectomy bra and the ankle foot orthotics are devices which are manufactured and distributed as an aid to the function and capacity of a person with a disability or illness. Therefore, these items are considered disability aids. The costs that you incurred in purchasing the mastectomy bra does qualify as a medical expense for the purpose of the medical expenses tax offset under section 159P of the ITAA 1936 and can be included when calculating your eligibility for the medical expenses tax offset. Even though the ankle foot orthotics is also an eligible disability aid, you cannot include its cost as an expense when calculating your eligibility for the medical expenses tax offset. This is because you did not actually incur the expense yourself and do not have a receipt to substantiate your claim. | Detailed Reasoning - Shoes: TR 93/34 lists surgical shoes and boots as being a medical or surgical appliance. The shoes that you purchased were not specifically made for your spouse, but are available to anybody to buy from the footwear retailer. The orthotic specialist recommended supportive footwear with deep and wide toe box, an appropriate shoe length, lace-up or Velcro fastening, removable insole, low heel height, non-slip sole and wide heel. The shoes that you purchased are not surgical shoes. They were not manufactured as, or distributed as, or generally recognised to be an aid to the function or capacity of a person with a disability or illness. The shoes have a conventional use. That is, they are designed for use by the general population rather than specifically as an aid for use by persons suffering a disability or illness. However, in considering whether an item is a disability aid, it is the character of the item which is determinative, not the purpose for which it is used. In your case, the character of the shoes remains conventional footwear. Despite the list of characteristics recommended by the orthotic specialist, the shoes are still shoes which have a conventional use, and are not a disability aid for the purposes of a medical expense. The costs that you incurred in purchasing the shoes do not qualify as medical expenses under subsection 159P(4) of the ITAA 1936 and therefore you cannot include the costs associated with the shoes when calculating your eligibility to a medical expenses tax offset. | Detailed Reasoning - Recliner lift chair: While it is acknowledged that the chair has some elements of a medical or surgical appliance because it aids the function of a person with a disability or illness, the item itself retains its domestic function of being a place to sleep or sit in a household setting. Its character remains in essence a piece of household furniture, and it is not medical or surgical appliance. Unlike an invalid chair, which is defined in the Macquarie Dictionary as 'a chair, usually collapsible, and always mobile, used for the transport of invalids unable to walk', your chair is not mobile and is not considered to be a medical or surgical appliance. As the chair you purchased is not considered a medical or surgical appliance it does not qualify as an eligible medical expense for the purposes of the medical expenses tax offset and therefore you cannot include the cost of the item when calculating your eligibility for the medical expense tax offset. | Detailed Reasoning - Attendant care: The concept of attendant care includes services and care provided to a person with a disability who needs personal assistance to complete activities of daily living, who is able to manage living in the community and who lives in their own home or in their own leased accommodation. Attendant care services provide assistance with everyday tasks and include, for example, personal assistance, home nursing, home maintenance and domestic services to a person who is blind or permanently confined to bed or a wheelchair. In your case, you cannot claim attendant care expenses for providing care to your spouse because they do not satisfy the specific criteria defined in paragraph 159P(4)(h) of the ITAA 1936 as your spouse is not blind, permanently confined to a bed, or a wheelchair.