Edited version of private ruling

Authorisation Number: 1011591837634

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Medical expenses tax offset

1. Do the following expenses qualify as medical expenses for the purpose of calculating a medical expenses tax offset:

· payments to your service provider for the program administration and supervision

· payments to the Applied Behaviour Analysis (ABA) therapists you have hired?

Yes.

2. Do the following expenses qualify as medical expenses for the purpose of calculating a medical expenses tax offset:

· administration costs you incurred in hiring and organising the ABA therapists, including advertising costs, telephone calls

· purchase of furniture to setup a room within your home as a specific purpose ABA therapy room

· purchase of materials specifically for ABA therapy, such as flashcards?

No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2009

Relevant facts and circumstances

You are Australian residents for taxation purposes.

Your child has been diagnosed with a severe condition.

Your child's paediatrician has referred them to a service provider who provides therapy. As a result of this, your child will be reviewed on a regular basis.

You have provided a copy of a letter supporting the diagnosis and referral.

You pay for the services of therapists and coordinate their schedules to attend your home.

Your home has been set up to include furniture that provides teaching and the storage of teaching materials, such as flashcards used in the delivery of therapy sessions to your child.

Relevant legislative provisions

Income Tax Assessment 1936 Section 159P.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

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 pays 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 year ended 30 June 2010 and $2,000 for the year ended 30 June 2011.

Medical expenses are defined in subsection 159P(4) of the ITAA 1936. Paragraph (d) of the definition includes payments made for therapeutic treatment administered by direction of a legally qualified medical practitioner.

In order to qualify for the tax offset such payments must meet the following conditions:

· they are for therapeutic treatment, and

· the therapeutic treatment is administered by the direction of a legally qualified medical practitioner.

In Case R95 84 ATC 633; 27 CTBR (NS) Case 148, the Administrative Appeals Tribunal found that 'therapeutic treatment' necessitated the exercise of professional skill in the medical field. This would normally involve the person administering the treatment using chemical agents or drugs or some physical and mental processes which are directed towards the cure or management of a disease or ailment.

The therapeutic treatment must be administered by direction of a legally qualified medical practitioner. The patient must be referred to a particular person for the therapeutic treatment (Case A53 69 ATC 313; 15 CTBR (NS) Case 30).

Payments for program and ABA therapy

In your case, your child was referred to the therapy by their paediatrician. The program administration and supervision are administered by a person exercising skill in the medical field. It is considered that the therapy satisfies the definition of therapeutic treatment.

Therefore the expenses you have paid for the administration, supervision and therapy are eligible medical expenses for the purposes of the medical expenses tax offset.

Administration costs

The duties of hiring and organising the therapy including advertising costs and telephone calls do not involve any healing or curing, nor is it a treatment administered by a person exercising skill in the medical field. Accordingly, this does not constitute therapeutic treatment for the purposes of the medical expenses tax offset.

Therefore, the costs you have paid for the administration of the therapy do not qualify as medical expenses under paragraph (d) of the definition and cannot be included when calculating the medical expenses tax offset.

Furniture and teaching materials

Paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments 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 expenses tax offset. The ruling states that a medical or surgical appliance is an instrument, apparatus or device which is manufactured as, or distributed as, or generally recognised to be an aid to the function or capacity of a person with a disability or an illness.

This definition looks to 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.

Paragraph 7 of TR 93/34 states that the mere fact that an item gives therapeutic treatment, in that it relieves, heals or prevents a medical condition, does not make it a medical or surgical appliance.

In your case, you have purchased furniture and teaching materials for use in the management of your child's medical condition.

These items are not manufactured or distributed as medical aids, they have multiple uses and are items that are purchased for a range of purposes. While it is appreciated that these items do assist your child with their medical condition they do not meet the definition of a medical or surgical appliance.

Therefore, the expenses you have paid for furniture and teaching materials are not eligible medical expenses for the purposes of the medical expenses tax offset.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).