Private ruling: Net medical expenses offset - disability aid
Date of advice: 21 September 2020
Published: November 2020
Ruling period: 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does a motor vehicle specifically designed for use by a wheelchair bound passenger qualify as a disability aid under section 159P of the Income Tax Assistance Act (ITAA) 1936? | A1: Yes, the motor vehicle is a disability aid under section 159P of the ITAA 1936 as it is an assistance device that is manufactured to aid the function or capacity of people with a disability. Therefore, the Net medical expenses tax offset is available.


Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1936 Subsection 159P(1) | Income Tax Assessment Act 1936 Subsection 159P(4) | Income Tax Assessment Act 1936 Paragraph 159P(4)(f)

Reasons for decision: Summary: The term 'disability' is not currently defined in the tax legislation. The Australian Institute of Health and Welfare considers a person to have a disability based on the Australian Bureau of Statistics Survey of Disability, Ageing and Carers definition as "if they have at least one of a list of limitations, restrictions or impairments, which has lasted, or is likely to last, for at least 6 months and restricts everyday activities." This is the same definition as published in the 2019 myTax Individuals instructions for the NMETO. It is acknowledged that you have a disability as defined above. Under subsection 159P(1B) of the ITAA 1936, 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: (a) relates to an aid for a person with a disability; or (b) relates to services rendered by a person as an attendant of a person with a disability; or (c) relates to care provided by an approved provider (within the meaning of the Aged Care Act 1997 ) of a person who: (i) is approved as a care recipient under that Act; or (ii) is a continuing care recipient within the meaning of that Act. Paragraph 159P(1B)(a) of the ITAA 1936 is relevant to the taxpayer's circumstances. That is, an amount will be treated as being paid as medical expenses if the payment "relates to an aid for a person with a disability". Subsection 159(4) exhaustively defines the term "medical expenses". Relevantly, paragraph (f) of that definition states that medical expenses means payments "in respect of a medical or surgical appliance (not otherwise specified in this definition) prescribed by a legally qualified medical practitioner". Therefore, for the taxpayer's vehicle to satisfy subsection 159P(1B) and be a 'medical expense' it must be in respect of a 'medical appliance' prescribed by a legally qualified medical practitioner; and relate to an 'aid for a person with a disability.' An appliance is not defined in the ITAA 1936 but it is defined elsewhere as "an instrument, apparatus, or device, a mechanical apparatus or device designed to assist a disabled person." Similarly, an apparatus has been defined outside the ITAA 1936 as "an assemblage of instruments, machinery, appliances, materials, etc., for a particular use." The Explanatory Memorandum to the Tax and Superannuation Laws Amendment (2014 Measures No.1) Bill 2014 (the EM) that brought in the amendments that inserted subsection 159P(1B) discusses the requirement to consider whether the expense is related to an aid for a person with a disability. Such a consideration will largely be a matter of fact and circumstance. Paragraph 3.25 of the EM states that "additional guidance will be provided by the Australian Taxation Officer to assist people with determining whether their expense is eligible to be claimed under the NMETO". However, no such guidance appears to have been published. Paragraph 3.26 of the EM states that the meaning of disability aids is to take its commonly understood meaning within the context of section 159P and the existing history of case law and administrative decisions. Further explanation of the intent of 'disability aids' is set out at paragraphs 3.27 to 3.28: Disability aids 3.27 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. | Detailed Reasoning - Example 3.1: Purchase of a wheelchair: A person with paraplegia purchases a wheelchair to assist with mobility. The wheelchair is a disability aid as it is an assistance device that is manufactured to aid the capacity of people with a disability. | Detailed Reasoning - Example 3.2: Maintenance of a guide dog: A person that is blind maintains a guide dog to achieve independence through access and mobility. The expenses associated with maintaining that guide dog, assuming they are eligible medical expenses under section 159P, would be related to an aid for a person with a disability. This is because the guide dog would be considered an item of property that is generally recognised to be an aid to the function and capacity of a person that is blind. 3.28 A disability aid would be considered to be an aid to function or capacity if it helps a person in performing activities of daily living or provides assistance to alleviate the effect of the disability. However, generally speaking, an ordinary or general household or commercial appliance is not a disability aid, even if it helps a disabled person. | Detailed Reasoning - Example 3.3: Purchase of an air conditioner: A person that is bed ridden with a disability has a particular sensitivity to heat (that is unrelated to the disability) and purchases an air conditioner for their house. Even though the air conditioner would help the person and relieve discomfort it is not a disability aid as it does not alleviate the effect of the disability and is not manufactured as, distributed as, or generally recognised to be, an aid to the function or capacity of a person with a disability. In Re Commissioner of Taxation of the Commonwealth of Australia v Ugur Ildes [1988] FCA 68 (16 March 1988) ( Ildes ) although a main factor was the consideration of whether a 'fixture' (being an inbuilt spa pool with hydrojets for the treatment of intractable back pain) could be a medical appliance, the meaning of "medical expenses" within section 159P and "medical or surgical appliance" within paragraph (f) of the definition of 'medical expenses' in subsection 159P(4) of the ITAA 1936 was also considered. Spender J held at [7]: "...the essential ingredient of a medical appliance for the purposes of s.159P(4)(f) is that it constitutes an aid to function or capacity. The mere fact that an article has a therapeutic purpose does not constitute the article a medical or surgical appliance within the meaning of the section." This test looks at the character of the appliance, not the purpose for which it is prescribed by a medical practitioner or used. A taxpayer's doctor prescribing the use of an appliance by itself is not sufficient to constitute a 'medical appliance'. For it to be a medical appliance, it needs to be manufactured as or distributed as or generally recognised to be an article or thing intended to achieve a medical or surgical end. Spender J considered Case P29 14 TBRD 143 where the Board of Review No.2 concluded that an air-conditioning unit used to relieve bronchial asthma was not a medical or surgical appliance for the purpose of the then relevant section of the Act. The observations of the Board at page 144 were reproduced with agreement at [7]: "(The taxpayer) argued that as the air-conditioning unit was purchased and installed for the purpose of improving his health and was effective in so doing it was a 'medical appliance' in the dictionary meaning of the words. We think that this approach to the question stems from a misunderstanding of the section. The taxpayer's physician advised the use of an air-conditioning unit, that is to say of an article which would be described in ordinary speech as a household and commercial appliance. That character of the appliance was not altered by either the recommendation of the physician or the taxpayer's purpose in purchasing and using it. The taxpayer also submitted that the section provided benefits for taxpayers and it should be given a liberal interpretation to effect the spirit and intention of the legislation. For the reasons which follow we think the words of the section are unambiguous and we give to them their ordinary meaning. It is not sufficient for a taxpayer to show that a physician has prescribed an appliance to be used for medical or surgical ends. That would be implicit without more in the requirement that the appliance be prescribed. The section requires that the appliance be a medical or surgical appliance, that is an appliance which is manufactured as or distributed as or generally recognised to be an article or thing intended to achieve a medical or surgical end." Spender J went on to determine that this view is consistent with the conclusion that a chairlift installed in a home and affixed to a stairway and electrically operated is a medical appliance within the subsection as held by the No.1 Board of Review in Case D37 72 ATC 210. At [9]: "Such a device is clearly an aid to function, in the same way as a wheelchair is." Withdrawn Taxation Ruling TR 93/34 Income tax: medical expense rebate - meaning of medical or surgical appliance was based on the reasoning in Ildes. It is important to note that this reasoning is based on legislation prior to the amendments that inserted the requirement that the 'medical appliance' be in relation to a 'disability aid'. However, it is still relevant as the amendments added to the previous requirements and the concept of 'disability aid' as stated in the EM are similar to the concepts of 'medical appliance' as held in Ildes . | Detailed Reasoning - In your situation: In your case, although it's a vehicle which has a domestic function of transportation, it is a specialty vehicle and not an ordinary household or commercial appliance. The character of the appliance is of a vehicle designed to assist people with a disability. Although the use by a wheelchair bound person is that of a passenger (and not driver), it aids the function or capacity of a person with a disability as it helps the taxpayer perform activities of daily living and provides the ability for them to be transported and mobile. Further, despite the vehicle being capable of being driven by your family members with or without you being present, the vehicle has been specifically manufactured for people with a disability who require the use of a wheelchair. The potential 'dual-purpose' does not change the character. The vehicle is recognised to be an aid to the function or capacity of a person with a disability, evidenced by them being sold by organisations that are NDIS providers and specialise in wheelchair vehicles and not through ordinary car lots. Accordingly, the vehicle is considered to be a disability aid for the purposes of subsection 159(1B) of the ITAA 1936, therefore the Net medical expenses tax offset is available for the 20XX income tax year.

Relevant facts: You were diagnosed some time ago with a medical condition which has led to permanent disability and requires you to use a wheelchair both inside and outside your home. | In a written Medical Certificate, your medical practitioner recommended the purchase of a specific motor vehicle to improve your quality of life and independence. | In 20xx, you purchased the specific Vehicle for $x. | The vehicle is designed specifically with a powered wheelchair positioned in the front passenger side, which allows you to enter and exit the vehicle in their wheelchair. | The wheelchair sits on an electric arm which rotates and lowers out of the vehicle, then detaches. When re-entering the car, the wheelchair is positioned on the extended electric arm which then raises the wheelchair back into the car and turns 90 degrees to return the chair to the correct position. | This vehicle is manufactured specifically to transport wheelchair bound persons and has not been modified.