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Ruling

Subject: Medical expenses tax offset

Question 1:

Do expenses incurred in purchasing and installing a fold down ramp to provide wheelchair access to a car qualify as eligible medical expenses for the purposes of the medical expenses tax offset?

Answer:

Yes.

Question 2:

Do expenses incurred in modifying a vehicle to facilitate the installation of a fold down ramp to provide wheelchair access to a car qualify as eligible medical expenses for the purposes of the medical expenses tax offset?

Answer:

No.

This ruling applies for the following period:

Year ended 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

Your dependant suffers from a disability and can only get around by a wheel chair.

Your dependant's doctor recommended that you modify your vehicle to enable them to access the vehicle.

You incurred costs in having your vehicle modified to be wheelchair accessible. The conversion included:

· Manual fold down rear entry ramp

· Dropped floor with built in safety cage and marine carpeting

· 4 wheelchair anchor points with tie-downs and a lap belt

· Engineering certificate, blue slip and weight bridge ticket

· Limited warranty on conversion

· Seating variations

· Fold down double rear seat forward facing

· Reversing sensors.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

Income Tax Assessment Act 1936 Subsection 159P(3A)

Income Tax Assessment Act 1936 Subsection 159P(4)

Income Tax Assessment Act 1936 Paragraph 159P(4)(f)

Reasons for decision

Summary

The fold down wheelchair ramp itself is considered to be a medical or surgical appliance and the purchase and installation costs are an eligible expense for the purposes of the medical expenses tax offset. However, the other modifications made to your vehicle to facilitate the installation of the ramp were not made in respect of a medical or surgical appliance and are therefore not eligible medical expenses.

Detailed Explanation

Medical expenses tax offset

Subsection 159P(3A) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a tax offset is allowable to a taxpayer whose net medical expenses in the year of income exceed the set threshold. For the 2011-12 income year the threshold is $2,060.

The medical expenses must be paid by the taxpayer in respect of themselves or their dependant.

The term 'medical expenses' is defined in paragraph 159P(4)(f) of the ITAA 1936 to include payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner.

Taxation Ruling TR 93/34 describes 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 assists or improves a person's abilities in performing activities of daily living.

Taxation Ruling TR 93/34 also provides that generally a household or commercial appliance is not a 'medical or surgical appliance' and that we need to look at the character of the appliance, not the purpose for which it is prescribed or used.

Fold down ramp

In Case D37 72 ATC 210; Case 7 (1972) 18 CTBR (NS) 33 (Case D37), the taxpayer installed a chair lift to enable his paralysed wife to move from floor to floor in their two storey house. The Board of Review held that the lift was a medical or surgical appliance, finding that:

   ... it can be said that the lift was specifically designed to replace or alleviate an absent or impaired bodily function or medical defect and the use of which, in the commercial sense, is limited in normal circumstances to such replacement or alleviation...In appearance and function the chair lift in the instant case may be equated to an invalid chair which is normally designed to enable the patient to travel in a horizontal plane. Here the chair was specifically designed for the vertical...

In your case you incurred costs in purchasing and installing a fold down ramp to enable your dependant wheelchair access to your family vehicle.

The fold down ramp is an 'appliance'. It has been manufactured and sold as an appliance which will enable a person who is confined to a wheelchair, as a result of their disability, to gain access to a car.

It assists your dependant's ability to perform one of the activities of daily living, which is travelling in or driving a passenger vehicle. In these circumstances the fold down ramp has the character as an aid to the function or capacity of a person with a disability. It is similar in nature to the lift in Case D37.

The payment for the purchase and installation of the fold down ramp is therefore in respect of a medical or surgical appliance and is an eligible expense for the purposes of the medical expenses tax offset.

Costs in preparation for the installation of the fold down ramp

While the costs incurred for the purchase and installation of the fold down ramp are an eligible medical expense, it must be determined whether the portion of the costs that related to modifying your car were payments in respect of a medical or surgical appliance.

Although the courts have held the phrase 'in respect of' to have 'the widest possible meaning of any expression intended to convey some connection or relation between the subject matters' (per Mann CJ in Trustees Executors & Agency Co. Ltd. v. Reilly [1941] VLR 110; [1941] ALR 105), there still needs to be a connection between the subject matters.

In Case R12 84 ATC 165; (1984) 27 CTBR (NS) 535 Case 63 , the Board of Review held that travel expenses incurred in order to have artificial limbs fitted were not payments relating to the artificial limbs themselves, and therefore were not payments in respect of an artificial limb as required under paragraph 159P(4)(e) of the ITAA 1936. The Board found that it was difficult to establish a connection between the subject matters being the travel costs and the artificial limbs. In the course of their decision, the Board accepted that the phrase 'in respect of' in the context of subsection 159P(4) of the ITAA 1936 does not extend to payments that are made 'because of', 'arising out of' or 'in connection with'.

ATO Interpretive Decision ATO ID 2010/47 considered a case where a taxpayer incurred a number of expenses to modify their vehicle to enable a fold down ramp to be installed. The taxpayer's spouse suffered from a physical disability and the taxpayer's doctor recommended the modifications to the vehicle to allow the taxpayer's spouse to be able to access the vehicle. The required modifications included:

· cutting and lowering the floor of vehicle to enable the installation of the wheelchair ramp;

· modifying the suspension to cater for the new configuration;

· moving and modifying the petrol tank;

· seating variations;

· installing special locking plates to lock the wheelchair in position;

· installing seat belts; and

· laying new carpet to cater for new configuration

In this case it was determined that the modifications above did not replace or alleviate an absent or impaired bodily function or medical defect. They related to either reconfiguring aspects of the vehicle in preparation for the installation of medical or surgical appliances, or meeting safety requirements. The modifications did not qualify directly as medical or surgical appliances themselves under paragraph 159P(4)(f) of the ITAA 1936.

In your case, in addition to installing a fold down wheelchair ramp, your vehicle required a number of modifications to facilitate the installation of the ramp. The modifications related to either reconfiguring the car in preparation for the installation of the fold down ramp, or meeting normal safety requirements. It is accepted that the costs were incurred because of or in connection with and as part of the preparation for the installation of the ramp. However they were not payments made 'in respect of' the ramp itself.

Consequently, the expenses you incurred on the modifications made to facilitate the installation of the ramp do not qualify as eligible medical expenses for the purposes of the medical expenses tax offset. You will need to make a reasonable apportionment to determine the eligible cost that relates to the purchase and installation of the ramp.

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