Private ruling: Medical expense tax offset - medical or surgical appliance
Published: September 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Does a made to measure chair purchased for your spouse qualify as an eligible medical expense for the purposes of the medical expenses tax offset? | A1: No.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You paid for medical expenses in relation to a dependant who was also an Australian resident for taxation purposes. Your dependant was diagnosed with a medical condition. Due to your spouse's medical condition they were referred to an occupational therapist. The occupational therapist recommended the purchase of a made to measure chair.

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)

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. The amount of net medical expenses tax offset you can claim will now depend on your level of income. You will be able to claim an offset of 10% of your net medical expenses over $5,000 if you have an adjusted taxable income (ATI) above: · $84,000 if you are single, or · $168,000 if you are a couple or family The family threshold will increase by $1,500 for each dependent child after the first. If your ATI is below these income thresholds, you are not affected by this change and can continue to claim an offset of 20% of your net medical expenses over the relevant threshold amount. For the 2012-13 financial year the threshold amount is $2,120. Please note that the threshold amount is subject to indexation and will change in future income years. | Detailed Reasoning - Medical or surgical appliances: Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the medical expenses tax offset. Paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner. Taxation Ruling TR 93/34 explains the meaning of a medical or surgical appliance for the purposes of the medical expense tax offset. The ruling states that a medical or surgical appliance is an instrument or device which is manufactured, distributed or generally recognised as an aid to the function or capacity of a person with a disability or an illness. This definition looks at the character of the appliance, not the purpose for which it is prescribed or used. TR 93/34 states that it is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends, and that generally, a household or commercial appliance is not a medical or surgical appliance. To be an aid to function or capacity, the item must help the person with the illness or disability to perform the activities of daily living. An item that merely has a therapeutic purpose, such as relieving, healing or preventing a medical condition, is not considered to be a medical or surgical appliance within the meaning of paragraph 159P(4)(f) of the ITAA 1936. | Detailed Reasoning - Chair: While it is acknowledged that the chair has some elements of a medical or surgical appliance because it aids the function of a person with a disability or illness, the item itself retain it's domestic function of being a place to sleep/sit in a household setting. Its character remains in essence a piece of household furniture, and it is not medical or surgical appliance. Unlike an invalid chair, which is defined in the Macquarie Dictionary as 'a chair, usually collapsible, and always mobile, used for the transport of invalids unable to walk', your chair is not mobile and is not considered to be a medical or surgical appliance. As the chair you purchased is not considered a medical or surgical appliance it does not qualify as an eligible medical expense for the purposes of the medical expenses tax offset and therefore you can not include the cost of the item when calculating your eligibility for the medical expense tax offset.