Private ruling: Medical expenses
Date of advice: 18 May 2016
Published: June 2016
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Do your out-of-pocket expenses in relation to your corrective surgeries qualify for inclusion in the calculation of the medical expenses tax offset in 20YY? | A1: No.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You suffered from a medical condition. You underwent surgery to improve your condition and maintain your ability to undertake employment. You did not receive any net medical expenses tax offset in your 20WW or 20XX income tax assessments.

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, 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 20WW-XX and 20ZZ-AA financial years and eligibility for this offset has changed. Transitional arrangements will allow taxpayers to claim the offset from the 20WW-XX income year until the end of the 20ZZ-AA income year, but only for those medical expenses relating to disability aids, attendant care or aged care. In addition, for the 20WW-XX and 20XX-YY 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 20VV-WW and 20WW-XX in respect to claims in the 20XX-YY income year). In your case you did not receive an amount of the NMETO in your 20WW and 20XX 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 20WW-XX to 20ZZ-AA 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. In your case, you have incurred costs in relation to a procedure to restore and preserve a specific function. Your diagnosed condition and subsequent restoration procedure is not considered to be a disability aid for the purposes of the medical expense tax offset. Accordingly, you are not able to include the costs for your relevant procedures in calculating a medical expense tax offset.