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

Ruling: Q1: Are incontinence products for a person with a disability considered to be a disability aid for the purposes of net medical expenses tax offset? | A1: Yes. | Q2: Is gluten-free food considered to be a disability aid for the purposes of net medical expenses tax offset? | A2: No.

Relevant facts and circumstances: You and your dependant are Australian residents for tax purposes. Your dependant has been diagnosed with a disability. Your dependant suffers from continence issues due to their disability and is required to use incontinence products. Due to your dependants disability your legally qualified medical practitioner has prescribed the use of gluten free foods. You have not received a net medical expenses tax offset in your 2012-13 income tax assessment.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | 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 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. In addition, for the 2013-14 and 2014-15 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 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 NMETO in your 2012-13 income tax assessment so you are limited to claims relating to disability aids, attendant care or aged care only. Disability aids 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 (paragraph 159(1B)(a) of the ITAA 1936). A disability aid is 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. 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. Gluten-free food is not a disability aid for the purposes of this definition because food is not an instrument, apparatus or device. However, incontinence products are considered to be a disability aid. They are manufactured as, distributed as and are generally recognised to be a product to assist with the management of bladder and bowel control for a person who has been diagnosed with urinary incontinence or faecal or bowel incontinence. Accordingly, only the incontinence products are considered to be a disability aid for the purposes of the net medical expense tax offset and you are entitled to include your out-of-pocket costs for these items in your calculation of the medical expenses tax offset.