Private ruling: Medical Expenses Tax Offset
Date of advice: 13 June 2016
Published: August 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Do the expenses incurred for a medical procedure qualify as an eligible medical expense for the purposes of the medical expenses tax offset? | A1: No. | Q2: Is the medical aid considered a disability aid for the purposes of the Medical Expenses Tax Offset? | A2: No.

Relevant facts and circumstances: You have had a medical procedure due to a combination of an injury and age related deterioration. The medical procedure was deemed necessary by relevant medical professionals and was not an optional procedure. There were costs not covered by Medicare or private health fund which included: • Surgeon's fee gap (which includes the cost of the prosthetic) • Anaesthetist fee • Other consulting physician fee • Hospital excess • Subsequent rehabilitation inpatient and outpatient costs • Prescribed pharmaceutical medicines • Equipment including a walking frame and walking stick • Physiotherapy before and after the operation. You have not previously claimed the net medical expenses tax offset.

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(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, 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 (NMETO) is being phased out between the 2013-14 and 2018-19 financial years and eligibility for this offset has changed. Transitional arrangements will allow taxpayers to claim the offset from the 2013-14 income year until the end of the 2018-19 income year, but only for those medical expenses relating to disability aids, attendant care or aged care. In addition, for the 2013-14 and 2014-15 income years, taxpayers will be eligible to claim the full range of medical expenses (as defined currently) but only if they have received an amount of the net medical expenses tax offset in the previous income year (or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 income year). In your case you did not receive an amount of the NMETO in your previous income tax assessments so you are limited to claims relating to disability aids, attendant care or aged care only. 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. 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. These examples are items of property that are manufactured as, distributed as and generally recognised to be an aid to the function or capacity. Anyone with a disability can go to a supplier and purchase these types of items. However, when it comes to artificial devices or appliances used in operations, these items cannot be purchased by a patient on their own, nor can they be sold by that person. They are an item that is supplied by the legally qualified medical practitioner as part of the operation. Whilst we accept that there was a device placement within your surgery 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 the medical procedure are not considered to be eligible medical expenses for the purposes of the NMETO.