Private ruling: Medical expenses
Date of advice: 13 October 2017
Published: March 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Do your expenses in relation to visits to doctors and other specialists qualify for inclusion in the calculation of the medical expenses tax offset? | A1: No. | Q2: Do the costs of your medication qualify for inclusion in the calculation of the medical expenses tax offset? | A2: No. | Q3: Do your out-of-pocket expenses in relation to your incontinence aids qualify as medical expenses and included in the calculation of your medical expenses tax offset? | A3: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1936 Paragraph 159P(1B)(a) Detailed reasoning | A medical expenses tax offset is available under section 159P 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. The above paragraph 159P(1B)(a) is relevant in your circumstances. | As highlighted in the Explanatory Memorandum to the amending legislation ( Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014) , whether an expense is related to a disability aid 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. 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: | ● speech difficulties; | ● blackout, fits, or loss of consciousness; | ● nervous or emotional condition causing restriction; | ● 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. | It is acknowledged that you have a disability as defined above. Therefore it is now necessary to determine if your expenses relate to an aid. | Disability aids | 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. Examples include wheelchairs and walking frames. | 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. | Whilst we accept that the visits to doctors and specialists are necessary, the associated costs for such visits were not in relation to a disability aid. Rather the payments were made to in relation to your illnesses. A payment to a doctor or a specialist are not considered to be a payment for an aid for paragraph 159P(1B)(a) of the ITAA 1936 purposes. | Similarly, even though your various medications are necessary and relate to your disabilities, the payments for your medications are not regarded as a payment for aids. | Therefore the costs involved with your procedures, medication or treatment by doctors and other specialists are not considered to be aids and are not eligible medical expenses for the purposes of calculating your medical expenses tax offset. | However, incontinence products are considered to be a disability aid. They are manufactured as, distributed as and are generally recognised to be a product to assist with the management of bladder and bowel control for a person who has been diagnosed with incontinence. | Accordingly, the incontinence products are considered to be a disability aid for the purposes of the net medical expense tax offset and you are entitled to include your out-of-pocket costs for these items in your calculation of the medical expenses tax offset. | Please note that the medical expenses tax offset is income tested. The percentage of net expenses you can claim is determined by your adjusted taxable income (ATI) and family status. Please refer to the Australian Taxation Office website ato.go.au and enter in the quick code QC 51164 for further details.


The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions. | Relevant facts: You have had medical conditions and were in hospital for several months. | Prior to this you also suffered other medical conditions. | Your disabilities are long-term. | You have had numerous and ongoing doctor and specialist consultations and procedures. You are also on many medications. | You also incur costs for carers and residential aged care expenses and incontinence aids.