Private ruling: Net Medical Expenses Tax Offset
Date of advice: 6 April 2017
Published: September 2017
Ruling period: Year ended 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are your out-of-pocket medical expenses eligible medical expenses for the Net Medical Expenses Tax Offset (NMETO)? | A1: No.

Relevant facts and circumstances: You are suffering from a severe medical condition. You underwent surgery. You had been granted access to your superannuation balance in order to pay for lifesaving treatment for this condition. You have provided copies of the invoices for the cost of this surgery.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P

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 2013-14 and 2018-19 financial years and eligibility for this offset has changed. Transitional arrangements will allow taxpayers to claim the offset from the 2013-14 income year until the end of the 2018-19 income year, but only for those medical expenses relating to disability aids, attendant care or aged care. 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 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. 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. Whilst we accept that there was an amount paid for surgery to aid with your medical condition but this does not change the fact the payments were made to a hospital and legally qualified medical practitioner in relation to an operation and not an amount paid in relation to a disability aid. Therefore the costs involved with your operation are not eligible medical expenses for the purposes of the NMETO. Note: The schedule 3 of the explanatory memorandum for the Tax and Superannuation Laws Amendment (2014 Measures No. 1) Act 2014 provides some overview as to what a disability aid is. The act states: Whether an expense is related to disability aids, attendant care or aged care will largely be a matter of fact and circumstance. During the phase-out period, additional guidance will be provided by the Australian Taxation Office to assist people with determining whether their expense is eligible to be claimed under the NMETO The concept of a disability aid , for the purpose of these amendments, is intended to mean an instrument, apparatus, assistance device or any other item of property that is manufactured as, distributed as, or generally recognised to be, an aid to the function or capacity of a person with a disability. This provides examples of aids such as wheel chairs or maintenance of guide dogs and as such glasses do not meet this definition. In relation to any possible surgery the reasoning is similar to that above. The surgery would not be a disability aid and thus would not be an eligible expense for the purpose of the NMETO.