Private ruling: Medical expenses tax offset
Date of advice: 14 September 2016
Published: November 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Do the expenses incurred for a joint replacement qualify as an eligible medical expense for the purposes of the medical expenses tax offset? | A1: No. | Q2: Is the prosthesis considered a disability aid for the purposes of the Medical Expenses Tax Offset? | A2: No.

Relevant facts and circumstances: You have had a joint replacement due to a combination of medical conditions. The joint replacement was recommended by a surgeon who indicated that the surgery may help your pain level and movement of your joint. You had many pre-operative x-rays and blood tests. You had travel, pharmacy and other costs associated with the operation.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P, | Income Tax Assessment Act 1936 Subsection 159P(1) and | Income Tax Assessment Act 1936 Subsection 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. From 2015-16 until 2018-19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care. 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. These examples are items of property that are manufactured as, distributed as and generally recognised to be an aid to the function or capacity. Anyone with a disability can go to a supplier and purchase these types of items. However, when it comes to artificial devices or appliances used in operations, these items cannot be purchased by a patient on their own, nor can they be sold by that person. They are an item that is supplied by the legally qualified medical practitioner as part of the operation. Whilst we accept that there was a device placement within your surgery this does not change the fact the payments were made to a hospital and legally qualified medical practitioner in relation to an operation and not an amount paid in relation to a disability aid. Therefore the costs involved with the joint prosthesis are not considered to be eligible medical expenses for the purposes of the NMETO.