Private ruling: Tax offset - medical expenses
Date of advice: 16 April 2017
Published: August 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Do your out-of-pocket expenses in relation to your ongoing medical treatment qualify for inclusion in the calculation of the medical expenses tax offset income year? | A1: No.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You were diagnosed with a condition and have been receiving ongoing treatment over an extended period. You have out-of-pocket expenses in regards to your ongoing treatment.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 159P(1) | Income Tax Assessment Act 1936 paragraph 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 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. Under recent changes to legislation, the net medical expense tax offset (NMETO) is being phased out between the 2013-14 and 2018-19 financial years and eligibility for this offset has changed. Claims for this offset are now restricted to net eligible expenses for disability aids, attendant care or aged care only. | 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. A person who is considered to be disabled is entitled to claim the cost of a disability aid towards meeting the net medical expense relevant threshold. This is provided that the aid is designed to be an 'aid to function or capacity'. That is, the aid helps a person in performing activities of daily living or provides assistance to alleviate the effect of the 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 and car controls for the disabled. We accept that you have been receiving medical treatment over several years and that these types of expenses were considered eligible medical expenses prior to the legislation changes. However, in your circumstances the payments you have been made are relation to medical treatment and not an amount paid in relation to a disability aid. Therefore the costs associated with your ongoing medical treatment are not considered to be eligible medical expenses for the purposes of the NMETO.