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Ruling

Subject: Medical expenses tax offset

Question 1

Do payments made for home care that relate to the personal care services rendered qualify as a medical expense for the purposes of the medical expenses tax offset?

Answer

Yes.

Question 2

Do the following expenses qualify as eligible medical expenses for the purposes of the medical expenses tax offset?

Hire of:

· lifter and sling

· transit wheelchair

· shower commode

Answer

Yes.

Question 3

Do the following expenses qualify as eligible medical expenses for the purposes of the medical expenses tax offset?

Hire of:

· pressure care mattress

· electric bed

· overbed table

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

You are an Australian resident.

You require full time assistance to enable you to continue living at home.

Your family has engaged care provider organisations.

You are permanently confined to a bed or wheelchair.

The home care attendants are not legally qualified medical practitioners or nurses.

You have the following equipment, recommended by your doctor, on hire:

· Pressure Care Mattress

· Electric Bed

· Overbed table

· Lifter and sling

· Transit wheelchair

· Shower commode

The cost of care and equipment hire was in excess of $2,060 for the income year, after any eligible reimbursements.

You paid the employer directly for the service provided by the carers.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P,

Income Tax Assessment Act 1936 Subsection 159P(4) and

Income Tax Assessment Act 1936 Subsection 159P(5).

Reasons for decision

Payment for carers

A medical expenses tax offset is available to a taxpayer under section 159P 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. The medical expense tax offset is 20% of the amount by which the net medical expenses exceed the threshold for that income year.

The threshold for the 2011-12 income year is $2,060.

The term 'medical expenses' is defined in paragraph 159P(4)(h) of the ITAA 1936 to include payments made 'as remuneration of a person for services rendered by him as an attendant of a person who is blind or permanently confined to a bed or an invalid chair.'

The wording of paragraph 159P(4)(h) of the ITAA 1936 differs from the wording of paragraphs 159P(4)(a) to 159P(4)(c) of the ITAA 1936 which require that for a payment to qualify as a medical expense it must be paid 'to' specific people, such as a legally qualified medical practitioner. Paragraph 159P(4)(h) of the ITAA 1936 does not require that the payment be made 'to' a specific person but rather that it be paid 'as' remuneration 'of' a person for the services they provide as an attendant. There is no requirement therefore that the payment be made directly to the person who provides the care.

This interpretation has been supported in the Small Taxation Claims Tribunal, in [2001] AATA 944 (Unreported, Senior member MD Allen, 15 November 2001). In that case the Tribunal allowed a taxpayer a medical expenses tax offset in respect of expenses paid to a company that provided carers. The rebatable amount only included payments actually made by the company to the carers. The portion of the expenses that was retained by the company for administrative services was not included as part of the rebatable amount.

That is where the payment is made to another entity, the only amount which will qualify for the tax offset is the amount that represents the remuneration of a person for their services as an attendant or carer. For example if the entity providing the care includes administration costs as part of the total cost for their services then the administration costs would not qualify as medical expenses.

In your case, as you are permanently confined to a bed or wheelchair the payments to the carer provider organisations made in respect of the personal care services, are medical expenses under paragraph 159P(4) (h) of the ITAA 1936.

Payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner

Medical expense is defined in paragraph 159P(4)(f) of the ITAA 1936 to include payments made 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' as an instrument, apparatus or device which is manufactured as, distributed as, or generally recognised to be an aid to the function or capacity of a person with a disability or illness.

Paragraph 4 of 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 definition requires looking to the character of the appliance, not the purpose for which it is prescribed or used. It is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends. To be a medical or surgical appliance an item must be manufactured as, distributed as, or generally recognised to be an aid to a person's function or capacity.

Paragraph 5 of TR 93/34 states that generally, a household or commercial appliance is not a 'medical or surgical appliance'.

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

Paragraph 8 of TR 93/34 includes the following among the examples of a 'medical or surgical appliance': bath seats used by invalids or aged persons, car controls for the disabled, crutches, hearing aids, neoprene bandages/wraps to provide support, invalid chairs and wheel chairs. While the list is not exhaustive and does not include all items which qualify as a 'medical or surgical appliance', it gives guidance as to the types of items which qualify.

The payment for the following items are considered to be in respect of a medical or surgical appliance for the purposes of paragraph 159P(4)(f) of the ITAA 1936 and the expenses can be included in your calculation for a medical expense tax offset:

· lifter and sling;

· transit wheelchair;

· shower commode

You have incurred expenditure on an adjustable bed and pressure care mattress. The adjustability of the bed will assist a carer to transfer you into your wheelchair with minimal lifting. It also assists in dressing. The memory foam mattress reduces the possibility of developing pressure sores.

The cost that you will incur in hiring the bed and mattress are not payments for therapeutic treatment administered by the direction of a legally qualified medical practitioner. The therapeutic treatment they provide does not qualify them as medical or surgical appliances. While your doctor may prescribe the use and purchase of the bed and mattress, your doctor can not oversee any treatment of your illness using these items.

As mentioned above, in considering whether an item is a medical or surgical appliance, it is the character of the item which is determinative, not the purpose for which it is prescribed or used. While it is acknowledged that the bed and mattress may aid the function of a person with a disability or illness and contribute to their comfort, the items themselves retain their domestic function of being a place to sleep in a household setting. Their character remains in essence as pieces of household furniture, and are not medical or surgical appliances. The same may be said for the overbed table, in that it remains essentially a piece of furniture.

Therefore the expenditure you will incur on the pressure care mattress, electric home care bed and overbed table are not eligible medical expenses.

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