Private ruling: Medical expenses tax offset - modifications to a motor vehicle including the purchase and installation of a wheel chair ramp
Published: March 2014
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Do expenses incurred in purchasing and installing a fold down ramp to provide wheelchair access to a motor vehicle qualify as medical expenses for the purposes of the net medical expenses tax offset? | A1: Yes. | Q2: Do expenses incurred to cut and lower the floor of a motor vehicle, reconfigure the exhaust system and fuel tank, and install locking plates and seat belts qualify as medical expenses for the purposes of the net medical expenses tax offset? | A2: No.

Relevant facts and circumstances: You are dependent on a motorised wheelchair. Your doctor recommended the use of a modified motor vehicle for your transport needs. You purchased a motor vehicle and incurred additional costs to have it modified. The modifications included the purchase and installation of a fold down ramp which is manufactured and sold specifically to allow wheelchair access to a motor vehicle. Other modifications included: • cutting and lowering the floor of the vehicle (to enable the installation of the ramp) • reconfiguring the exhaust system and fuel tank • installing locking plates to lock the wheelchair in position, and • installing seat belts. When you are travelling as a passenger the ramp enables you to get into and out of the vehicle whilst remaining in your motorised wheelchair. The ramp also enables you to get your motorised wheelchair into and out of the vehicle when you are accessing it to drive the vehicle yourself.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 159P | Income Tax Assessment Act 1936 paragraph 159P(4)(f)

Reasons for decision: Summary: 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) exceed a certain threshold in the year of income (section 159P of the Income Tax Assessment Act 1936 (ITAA 1936)). For the year ended 30 June 2012 the amount of the tax offset is calculated as 20% of the excess of net medical expenses over the threshold of $2,060. The definition of 'medical expenses' includes payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner (paragraph 159P(4)(f) of the ITAA 1936). Taxation Ruling TR 93/34 Income tax: medical expense rebate - meaning of medical or surgical appliance (TR 93/34) explains that a 'medical or surgical appliance' is 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 illness. In FC of T v. Ildes 19 ATR 952; 88 ATC 4214 ( Ildes' case ) Spender J stated: the essential ingredient of a medical appliance for the purposes of paragraph 159P(4)(f) is that it constitutes an aid to function or capacity. The character of an appliance cannot be altered by either the recommendation of a physician or the taxpayer's purpose in purchasing and using it. To be a medical or surgical appliance, the appliance must be manufactured as, or distributed as, or generally recognised to be an article or thing intended to achieve a medical or surgical end. An appliance is an aid to function or capacity if it helps a person perform activities of daily living. This test looks to the character of the appliance, not the purpose for which it is used or prescribed. It is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends (paragraphs 4 and 15 of TR 93/34). Generally, a household or commercial appliance is not a medical or surgical appliance (paragraph 5 of TR 93/34). However, modifications to items sold commercially for general purposes that are an aid to function or capacity may fall within the meaning of medical or surgical appliances for the purposes of the medical expenses tax offset. In Case D37 72 ATC 210; Case 7 (1972) 18 CTBR (NS) 33 ( Case D37 ), the taxpayer's wife was paralysed from the waist down. She was able to walk with the aid of a stick; however, she could not negotiate the steps of the two storey house in which she resided. The taxpayer installed a chair lift to enable her to move from floor to floor. The chair lift was electrically operated and consisted of a padded chair that travelled on a mono-rail fixed to the stairway. The Board of Review held that the lift was a medical or surgical appliance. The Board of Review stated that: it can be said that the lift was specifically designed to replace or alleviate an absent or impaired bodily function or medical defect and the use of which, in the commercial sense, is limited in normal circumstances to such replacement or alleviation...In appearance and function the chair lift in the instant case may be equated to an invalid chair which is normally designed to enable the patient to travel in a horizontal plane. Here the chair was specifically designed for the vertical. We agree with the Commissioner that an invalid chair satisfies the description of a medical or surgical appliance for the purpose of the statutory definition and would accord like treatment to the appliance with which we are presently concerned and which has aptly been described as a stairchair. In your case, you have incurred expenditure modifying your vehicle in order to access it as a passenger while remaining in your motorised wheelchair, and so that you can load and unload your motorised wheelchair into the vehicle when you will be driving it yourself. The fold down ramp is an appliance. It is manufactured and sold as an appliance which will enable a person who is dependent on a motorised wheelchair, as a result of illness or disability, to gain access to a motor vehicle. It assists your ability to perform activities of daily living; that is, driving or travelling in a motor vehicle. The fold down ramp is similar in nature to the chair lift in case D37; it has the character of an aid to the function or capacity of a person with an illness or disability. The cost of purchasing and installing the fold down ramp is therefore an expense incurred in respect of a medical or surgical appliance. As such, the expenses incurred in purchasing and installing the fold down ramp qualify as medical expenses for the purposes of the net medical expenses tax offset. The motor vehicle itself is not a medical or surgical appliance. While some of the other modifications (that is, other than the installation of the fold down ramp) may qualify as an 'appliance' they do not qualify as a 'medical or surgical appliance'. The modifications are not themselves an aid to the function or capacity of a person with a disability or illness. They do not replace or alleviate an absent or impaired body function or medical defect. They relate to either reconfiguring aspects of the motor vehicle to enable the installation of the fold down ramp, or meeting safety requirements. As such, the modifications themselves do not qualify directly as medical or surgical appliances. However, the cost of the other modifications may still be payments 'in respect of' a medical or surgical appliance. That is, is the payment for the modifications to the motor vehicle 'in respect of' the fold down ramp. Although the courts have held the phrase 'in respect of' to have 'the widest possible meaning of any expression intended to convey some connection or relation between the subject matters' (per Mann CJ in Trustees Executors & Agency Co. Ltd. v. Reilly [1941] VLR 110; [1941] ALR 105), there still needs to be a connection between the subject matters. 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 159P(4)(e) of the ITAA 1936. The Board found that it was difficult to establish a connection between the subject matters being 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 readiness for the installation of the fold down 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 fold down ramp. However, they were not payments made 'in respect of' the ramp itself. Consequently, the expenses incurred on the modifications to the motor vehicle (that is, other than the installation of the fold down ramp) do not qualify as medical expenses for the purposes of the net medical expenses tax offset.