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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012550654007

Ruling

Subject: Medical expenses tax offset

Question 1

Does the entire cost of the modifications to your motor vehicle for your wheelchair access and self drive needs, qualify as a medical expense for the purposes of the medical expenses tax offset?

Answer

No.

Question 2

Does the cost of the following qualify as medical expenses for the purposes of the medical expenses tax offset:

Answer

Yes.

Question 3

Does the cost of the following in your motor vehicle qualify as medical expenses for the purposes of the medical expenses tax offset

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2011

Relevant facts

You are totally reliant on a wheelchair for mobility.

You are no longer able to independently transfer from your wheelchair into a normal vehicle and have been advised to decrease manual wheelchair pushing/propelling and avoid activities that exacerbate and result in further deterioration of your medical problems.

To help preserve your current level of function and increase your independence under the guidance and recommendation of your medical practitioner, you have recently purchased a power wheelchair and a vehicle suitable to be modified for wheelchair access and disabled driver requirements.

The vehicle has undergone fully engineered qualified wheelchair modifications.

The vehicle has significantly helped you to increase your level of independence without the sole reliance of your partner to attend medical appointments, shopping, paying bills, community and social events and activities.

The modifications allow you to independently load yourself into the vehicle while remaining in your wheelchair via a hydraulic hoist and to travel safely as a passenger, self drive and having ample room for essential medical equipment.

You have no access to wheelchair accessible public transport and have no immediate family support.

You will require surgery in the near future and the wheelchair accessible vehicle will be vital to meet your post surgery needs for transportation to medical appointments, hospitals and rehabilitation treatments.

You purchased the vehicle from entity A which specialises in wheelchair accessible vehicles.

You have incurred costs for the following modifications:

You paid for the roof and power sliding door in the 2011-12 income year.

You paid for the remainder of the costs in the 2012-13 income year.

The internal roof height was increased to allow adequate head room for you.

The power sliding side door enables you to open and close the vehicle's side rear passenger door by remote control.

The hand control driving system is designed to enable you to drive and operate the vehicle independently.

The electric hoist is manufactured and sold specifically to allow wheelchair access to a vehicle. It allows you to operate it remotely and independently.

The transfer seat assists and enables you to independently and safely transfer from your wheelchair to the front passenger seat. It is recommended and preferred method of travel as prescribed by your doctor and seating specialists for distances taking more than 30 minutes or in terrain that varies in horizontal and vertical depth and direction such as hills and corners.

The auto entry system allows you to open and close the rear door and to unfold, lower, raise and fold the wheelchair hoist by remote control.

The auto docking system locks the wheelchair to the vehicle floor and allows you to independently secure and use the power wheelchair in the driver and rear passenger seat positions.

The ramp is specifically manufactured to allow wheelchair access to the inside of the vehicle.

The modifications were prescribed by your medical practitioner and assist you to independently drive and travel as a passenger.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159P(4)

Reasons for decision

Section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a tax offset is allowable to a taxpayer whose net medical expenses (that is, medical expenses less any amount paid or payable by Medicare or a private health fund) in the year of income exceed a certain threshold.

For the 2011-12 income year, the amount of the tax offset is calculated as 20% of the excess of net medical expenses over the threshold of $2,060. For the 2012-13 income year the amount of the tax offset is calculated as 20% of the excess of net medical expenses over the threshold of $2,060 if your combined adjusted taxable income for families is below $168,000. Where the combined adjusted taxable family income is above $168,000, you are able to claim 10% of net medical expenses over $5,000.

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 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 8 of TR 93/34 includes the following among the examples of a 'medical or surgical appliance': car controls for the disabled, crutches, 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.

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:

Hand control system

Car controls for the disabled are listed as being a medical or surgical appliance in TR 93/34.

Hoist, auto entry system, ramp, transfer seat, docking system and wheelchair anchor points

A hoist which is manufactured as, distributed as and is generally recognised to be an aid for a person with a disability or illness would be a 'medical or surgical appliance'.

Your electric hoist allows you to be transferred into and out of the vehicle and is therefore regarded as an aid which helps a person in performing activities of daily living and is not a household or commercial appliance.

The hoist is similar in character to the chair lift in Case D37. It was said to be specifically designed to replace or alleviate an absent or impaired bodily function or medical defect, and therefore seen to be an aid to the function or capacity of a person with a disability or an illness.

Therefore, the hoist and the associated auto entry system is a medical appliance.

The ramp for your motor vehicle is an appliance. It has been manufactured and sold as an appliance which will enable a person who is confined to a wheelchair, to gain access to a car. It assists a person's ability to perform one of the activities of daily living, that is, travelling in a vehicle. The 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 lowering and ramping of the driver's side floor is therefore a medical or surgical appliance for the purposes of paragraph 159P(4)(f) of the ITAA 1936.

The wheelchair restraint system including the anchor points and docking system is considered to be in respect of a medical or surgical appliance for the purposes of paragraph 159P(4)(f) of the ITAA 1936.

The above medical appliances were prescribed by a legally qualified medical practitioner. Accordingly, the associated expenses incurred for the above items qualify as medical or surgical appliances and are considered a medical expense when calculating your medical expenses tax offset.

Medium roof and power sliding door

The car itself is not a medical or surgical appliance. A motor vehicle, modified or otherwise, is a means of private transport and it retains its character as a passenger vehicle. It is not an item which is specifically manufactured, distributed or generally recognised for use by a person with a disability or illness.

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 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'.

It is accepted that the costs of the roof and door were incurred because of or in connection with and as part of the preparation for the installation of the hoist and other equipment. However they were not payments made 'in respect of' the hoist itself.

We acknowledge that the vehicle allows you to travel independently, however, the roof and the door do not replace or alleviate an absent or impaired bodily function. The remote control door and medium roof do not have the character of being an aid to a disabled person's function or capacity.

They relate to the reconfiguring aspects of the vehicle in preparation for the installation of medical or surgical appliances. These modifications do not qualify directly as medical or surgical appliances themselves under paragraph 159P(4)(f) of the ITAA 1936.

Although the roof and door work were necessary to complete the modifications of the motor vehicle, it is not a payment made in respect of a medical or surgical appliance. The character of the modifications to the roof and door of your vehicle are not altered even when recommended by a legally qualified medical practitioner.

Consequently, the expenses incurred for the roof and door modifications made to your motor vehicle in preparation for the installation of the hoist and other equipment do not qualify as medical expenses under paragraph 159P(4)(f) of the ITAA 1936.

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