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Edited version of private ruling
Authorisation Number: 1011838686871
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Ruling
Subject: Medical expenses tax offset
Question and answer:
Are you entitled to include the cost of purchasing a medical device when calculating your net medical expenses tax offset?
Yes.
This ruling applies for the following period:
Year ended 30 June 2011
The scheme commenced on:
1 July 2010
Relevant facts:
You have a diagnosed medical condition.
You are under the care of a registered specialist doctor.
Your specialist doctor prescribed the use of a medical device.
This device is used in conjunction with a pharmacological approach to put off the need for surgery.
The medical device is prescription-only and is used in the treatment of various health conditions.
You purchased this medical device from your specialist doctor.
Relevant legislative provisions:
Income Tax Assessment Act 1936 Section 159P
Reasons for decision
A medical expenses tax offset is available under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936), where you incur medical expenses for yourself or a dependant who is an Australian resident.
The medical expenses tax offset is only available if the amount of medical expenses (reduced by an entitlement to reimbursement from a health fund or government authority) in the income year exceeds $2,000. The tax offset is 20% of the amount by which the net medical expenses exceed $2,000 for that income year.
Paragraph (f) of the definition of medical expenses under 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 95/34 describes a medical or surgical appliance as being an instrument, apparatus or device that is manufactured, distributed or generally recognised as an aid to the function or capacity of a person with an illness. TR 95/34 states that function or capacity includes the ability to perform activities of daily living.
In your case, the medical device is a prescription only item. In practice, the device is used in the treatment of various health conditions. In your case, the device is being used in conjunction with other treatment, in an effort to put off your need for surgery.
Therefore, the device is manufactured as, and distributed as, a device to be an effective aid to the function or capacity of a person with an illness. The device is helping you perform activities of daily living without the need for surgery. The device meets the requirements of TR 95/34 and can be classified as a medical or surgical appliance for the purposes of subsection 159P(4) of the ITAA 1936.
Your registered specialist doctor prescribed the use of the medical device in conjunction with pharmacological approaches to treat your diagnosed health condition. Therefore, the use of the device was prescribed by a legally qualified medical practitioner.
In conclusion, the expense you incurred in purchasing the medical device does qualify as a medical expense for the purposes of section 159P of the ITAA 1936 and you are entitled to include this expense when calculating your net medical expenses tax offset.
Other relevant comments
Please note that subsection 159P(1) of the ITAA 1936 provides that the 'rebatable amount' is the amount of medical expenses less any amount which the taxpayer is paid or is entitled to be paid by a government or public authority or a society, association or fund (eg Medicare or a private health fund).
Accordingly, if you receive or are entitled to receive a reimbursement from any relevant entity, you will be required to reduce the amount of your medical expenses by the reimbursement for the purposes of calculating your entitlement to the medical expense tax offset under section 159P of the ITAA 1936.
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