Private ruling: Medical expenses tax offset
Published: April 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Do your out-of-pocket expenses in relation the purchase of a disability aid and its accessories qualify for inclusion in the calculation of the medical expenses tax offset? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You have been diagnosed with a disorder, Your legally qualified medical practitioner has prescribed the use of a disability aid. You have out-of-pocket expenses in relation to the purchase of disability aid. You have not received a reimbursement from Medicare or a private health fund. You did not receive an amount of the medical expenses tax offset in your 2012-13 income tax assessment.

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 2013-14 and 2018-19 income years and eligibility for this offset has changed restricting who can claim and what medical expenses can be claimed. 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, regardless of whether they have receive an amount of the NMETO in the previous year. In addition, for the 2013-14 and 2014-15 income years, taxpayers will be able to claim the full range of medical expenses but only if they have received an amount of the NMETO in the previous year, i.e. in their 2012-13 income tax assessment or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 income year. In your case, you have not received an amount of the medical expense tax offset in your 2012-13 income tax assessment so your are limited to claims relating to disability aids, attendant care or aged care only. 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. In your case, you suffer from a disability and the item you have purchased is considered to be a disability aid. The item is manufactured as, distributed as and are generally recognised to be a product that assists with the management of a particular disorder. Therefore, you are entitled to include your out-of-pocket costs for the disability aid and its accessories in your calculation of the net medical expenses tax offset.