Private ruling: Net Medical Expenses Tax Offset
Date of advice: 25 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Is a sleep apnoea machine and mask a disability aid? | A1: Yes | Q2: Are you able to claim your sleep apnoea and mask as an eligible expense for the net medical expenses tax offset (NMETO)? | A2: Yes

Relevant facts and circumstances: You are an Australian resident for tax purposes. You have been diagnosed with severe sleep apnoea. You require the use of a sleep apnoea machine and mask that regulates and restarts your breathing while you sleep. You have claimed and received an amount of NMETO in the tax years 2012-13, 2013-14 and 2014-15.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P.

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 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. Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014 amended section 159P of the ITAA 1936 to phase out the 'Net Medical Expense Tax Offset'. 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 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. 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. 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 shortness of breath or breathing difficulties causing restriction. Sleep apnoea would fall within this category. In your case you require the use of a sleep apnoea machine to regulate and restart your breathing while you sleep. Sleep apnoea machines and masks are considered to be disability aids for the purposes of the medical expense tax offset. Therefore your out-of-pocket costs for your sleep apnoea machine and mask are included in the calculation of the medical expenses tax offset. Please note that 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.