Private ruling: Tax offset and capital gains tax
Date of advice: 8 April 2016
Published: June 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Questions and Answers | Are you entitled to claim a tax offset for net medical expenses? | Yes.

Relevant facts and circumstances: You have a disability. It is affecting your performance at work and at home. You have provided copies of documentary evidence from a medical specialist to support your claim. You had to purchase two medical aids as prescribed by your medical specialist. The total cost for the aids was $X. In support of your claim, you have provided copies of invoices from the business who supplied the aids. Your health fund contributed $X towards the cost of your aids, leaving you with out of pocket expense were $X. In support of your claim, you have provided a copy of the statement from your health care provider.

Relevant legislative provisions: Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014 | Income Tax Assessment Act 1936 Section 159P

Reasons for decision: Summary: Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014 amended section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) to phase out the 'Net Medical Expense Tax Offset' (NMETO). However, for the 2013-14 to 2018-19 years of income, an amounts paid as medical expenses will still be entitled to claim a NMETO provided that the person with a disability. 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 it is not currently defined in the tax laws, nor, more importantly, does it appear to have been defined in respect of NMETO, the ATO has used the definition published by the Australian Institute of Health and Welfare (AIHW), an independent statutory authority, which is: A disability is defined as 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: • your medical condition. 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. The AIHW has published the following in respect of disability aids: Aids and equipment are generally defined as products that assist a person with disabilities by improving their functioning, increasing participation in society and/or improving their quality of life. Aids and equipment have been defined as operating to: • increase or improve functional capabilities of individuals with disabilities • improve functioning, enable a person to live at home and in the community, and enhance independence. The ATO accepts the interpretation of disability and disability aids as described in the information above. Thus, for example, the cost of a medical aid is considered to be a disability aid the cost of which may be included in the calculation of a NMETO. In your case, you have a medical condition which has been identified as a disability by a competent medical authority who has prescribed aids to correct your disability. You have incurred net (out of pocket) medical expenses of $X after deducting $X paid by your health fund and have documentary evidence to substantiate this. Therefore, you are entitled to include your net medical expenses in a claim for a NMETO for the income year of the ruling.