Private ruling: Medical expense Tax Offset
Published: November 2011
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Q1: Does the cost of purchasing and modifying a motor vehicle for wheel chair access and transport needs qualify as medical expenses for the purposes of the medical expenses tax offset? | A1: No | Q2: Does the costs associated with installing a power fold out ramp with remote controls and wheel chair restraint tracking to the motor vehicle qualify as medical expenses for the purposes of the medical expenses tax offset? | A2: Yes

Relevant facts and circumstances: You have suffered an injury resulting in being confined to a wheel chair. You are reliant on carers to drive you about. Your doctor and consulting occupational therapist are responsible for your ongoing medical treatment and have recommended a vehicle modification and apparatus be purchased to help you overcome your mobility difficulties and allow a degree of independence. On their recommendation you purchased a motor vehicle and have had modifications carried out by a manufacturer who specialise in self-drive and mobility aids for the disabled. You had a number of modifications made. You have provided copies of the following documents: § Occupational therapy report § Quote and tax invoice

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1936 Subsection 159P(4)

Reasons for decision: Summary: The costs of purchasing your van and modifying the motor vehicle do not qualify as medical expenses for the purposes of calculating the medical expenses tax offset. However, the costs of purchasing and installing the power fold out ramp with remote controls and wheel chair restraints tracking qualify as medical expenses for the purpose of calculating the medical expenses tax offset. | Detailed Reasoning - Detailed reasoning: Section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a tax offset is allowable to a taxpayer whose net medical expenses (that is, medical expenses less any amount paid or payable by Medicare or a private health fund) in the year of income exceed a certain threshold. Paragraph (f) of the definition of medical expenses in section 159P(4) of the ITAA 1936 defines medical expenses as 'payments made in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner'. Taxation Ruling TR 93/34 explains the meaning of a 'medical or surgical appliance' as an instrument, apparatus or device which is manufactured as, distributed as or generally recognised to be an aid to the function or capacity of a person with a disability or an illness. The ruling states that an appliance is an aid to function or capacity if it helps the person with the disability or illness perform the activities of daily living. The question of whether the appliance is an aid to function or capacity looks at the character of the appliance and not the purpose for which the appliance is prescribed or used. | Detailed Reasoning - Motor vehicle: A motor vehicle is an everyday item purchased as a means of transport either for personal transport or some other need. It is not an item which is specifically manufactured, distributed or generally recognised for the use by a person with a disability or illness. A vehicle is a means of private transport and it retains its character as a passenger vehicle. While it may allow a person to travel in more comfort, safety and at their convenience it does not replace or alleviate an absent or impaired bodily function, it is not an aid to function and capacity within the meaning of a medical or surgical appliance. The character of an appliance cannot be altered by either the recommendation of a physician or the purpose for its purchase and use. Consequently, the expenses incurred in purchasing your motor vehicle do not qualify as medical expenses for the purposes of section 159P of the ITAA 1936 and cannot be included in your calculation for a medical expenses tax offset. | Detailed Reasoning - Vehicle modification: You incurred expenses in modifying your motor vehicle to make it accessible for you. To ascertain if the expenses you have incurred are within the parameters of the medical expenses tax offset it is necessary to examine whether the payments for all the motor vehicle modifications are actually 'in respect of a medical or surgical appliance' under paragraph (f) of the definition. The leading case on what constitutes a medical or surgical appliance is FC of T v. Ildes 19 ATR 952; 88 ATC 4214 ( Ildes' Case). The principles established in Ildes' Case have been adopted in subsequent decisions. The Courts and Tribunals have consistently held that a medical or surgical appliance should be an aid to function or capacity and must be manufactured as, or distributed as, or generally recognised to be, an article or thing intended to achieve a medical or surgical end. In Case D37 72 ATC 210; case 7 (1972) 18 CTBR (NS) 33 ( Case D37), the taxpayer installed a chair lift to enable his paralysed wife to move from floor to floor in a two storey house. The Board of Review held that the lift was a medical or surgical appliance, finding that the lift was specifically designed to replace or alleviate an absent or impaired bodily function or medical defect. In appearance and function the chair lift was equated to an invalid chair. In your case, the power fold up ramp with remote controls and wheel chair restraints tracking can be termed as medical or surgical appliances because these items have been manufactured and sold as appliances which will enable a person who is confined to a wheel chair to gain access to a motor vehicle. Accordingly, the purchase and installation of these items qualify as a 'medical or surgical appliance' and is included as a medical expense. The next question is whether the payments for the modifications to the car in preparation for the installation of the ramp are payments 'in respect of' a medical or surgical appliance. In Case R12 84 ATC 165; (1984) 27 CTBR (NS) 535 Case 63, the Board of Review held that travel expenses incurred in order to have artificial limbs fitted were not payments relating to the artificial limbs themselves, and therefore were not payments in respect of an artificial limb as required under paragraph (e) of the definition of medical expenses in section 159P(4) of the ITAA 1936. The Board found that it was difficult to establish a connection between the travel costs and the artificial limbs. In the course of their decision, the Board accepted that the phrase 'in respect of' in the context of subsection 159P(4) of the ITAA 1936 does not extend to payments that are made 'because of', 'arising out of' or 'in connection with'. The payments for the modifications relate to either reconfiguring the car in preparation for the installation of the fold out ramp, or meeting normal safety requirements. It is accepted that the costs were incurred because of or in connection with and as part of the preparation for the installation of the ramp. However, they were not payments made 'in respect of' the ramp itself. Although they are necessary to complete the modifications of the motor vehicle and subsequent operation of the wheelchair ramp, they are not payments made in respect of a medical or surgical appliance. Therefore, the payment for the purchase and installation of these items are not medical expenses and cannot be included in your calculation for a medical expenses tax offset.

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