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Ruling

Subject: Medical expenses tax offset

1. Can the cost of your Program be included as a medical expense for the purpose of calculating a medical expenses tax offset?

Yes.

2. Can the net cost of the following items be included as a medical expense for the purpose of calculating a medical expenses tax offset?

This ruling applies for the following period

Years ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You had an operation at a hospital for a fractured hip.

You were discharged from the rehabilitation unit of the hospital with a recommendation from the doctor that you undertake the Program. The doctor and his team worked with the therapists from a community services organisation.

No Program costs were reimbursable by Medicare or a private health fund.

The knee brace and other items were recommended in a letter by your general practitioner. You received a partial reimbursement for some of the items from your health fund.

The medical expenses for your treatment will exceed $1,500 for the 2009-2010 year.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

Reasons for decision

Question 1

Summary

As the expenses were incurred in respect of an illness, and were made for therapeutic treatment at the direction of a legally qualified medical practitioner, they qualify for inclusion in the calculation of the medical expenses tax offset.

Medical Expenses Tax Offset

A medical expenses tax offset is available to a taxpayer under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer incurs medical expenses in an income year for themselves or a dependant who is an Australian resident, to the extent that they are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund.

The medical expenses tax offset is 20% of the amount by which the net medical expenses exceed $1,500 for the income year.

Therapeutic treatment

The term 'medical expenses' is defined in subsection 159P(4) of the ITAA 1936, and includes such payments made for therapeutic treatment administered by direction of a legally qualified medical practitioner.

In Case R95 84 ATC 633; 27 CTBR (NS) Case 148, the Tribunal found that 'therapeutic treatment' necessitated the exercise of professional skill in the medical field in some positive way, which would normally involve the person undertaking the act of administering the treatment using chemical agents or drugs or a physical or mental process of one kind or another in a manner that is directed towards the cure or management of disease or of diseased patients.

Therapeutic treatment is administered by direction of a legally qualified medical practitioner when the treatment is undergone as part of the medical practitioner's care of the patient.

Furthermore, therapeutic treatment as a concept is concerned with healing or curing, rather than preventing the need for therapy (18 TBRD Case T67; 14 CTBR (NS) Case 31). Although the treatment must be administered by direction of a legally qualified medical practitioner, the treatment need not be administered by such a practitioner.

In your case, you were prescribed the Program by a doctor who, with his team, worked with the therapists.

Therefore, the Program treatment is therapeutic treatment administered by a legally qualified medical practitioner and payments for this treatment are eligible for the medical expenses tax offset under section 159P of the ITAA 1936.

Question 2

Summary

The items are clearly recognised as aids to the function or capacity of a person with a disability or illness. Accordingly, they qualify as medical or surgical appliances for the purposes of paragraph 159P(4)(f) (ITAA 1936) and are a rebatable medical expense.

Medical appliances

An appliance can be regarded as being prescribed by a medical practitioner if he/she recommends its use; there is no need for that recommendation to be in writing (Case J62 77 ATC 532; (1977) 22 CTBR (NS) Case 11). 

In your case, the knee brace and other items were recommended by your doctor.

You purchased these items based on the professional advice received.

Therefore, it is considered that the prescription requirement would be met in your case.

Taxation Ruling TR 93/34 explains the meaning of a 'medical or surgical appliance' as being an instrument, apparatus 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.

An appliance is an aid to function or capacity if it helps the person with the illness or disability to perform the activities of daily living.

Paragraph 4 of Taxation Ruling TR 93/34 states that an appliance is an aid to function or capacity if it helps the person with the disability or illness perform the activities of daily living.

The over toilet frame, knee brace, medical sheep skin, and other appliances are devices that are used with a view to preventing illness and facilitating rehabilitation by providing stability and assistance in movement. The items are clearly recognised as aids to the function or capacity of a person with a disability or illness. Accordingly, they qualify as 'medical or surgical appliances' and are rebatable medical expenses.

However, as you received a partial reimbursement for some of the items from your health fund, only the net cost of the items can be included in the calculation of a medical expenses tax offset.

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