Edited version of private ruling

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Ruling

Subject: Medical expenses tax offset

Question

Is the cost of purchasing an extended warranty, dehumidifier, remote control, domes, wax guards and insurance against loss and accidental damage of your hearing aids eligible medical expenses for the purposes of the medial expenses tax offset?

Answer

Yes.

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

You suffer from a hearing disability and have been fitted with two hearing aids.

You have paid for the following items in the use/maintenance of your hearing aids:

· extended warranty

· dehumidifier

· remote control

· domes

· wax guards

Your hearing aids have been added to your home and contents insurance policy as a specified portable valuable.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159P(1)

Income Tax Assessment Act 1936 Subsection 159P(4)

Reasons for 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.

Paragraph (e) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments in respect of an artificial limb (or part of a limb), artificial eye or hearing aid.

Taxation Ruling TR 93/34 explains that hearing aids qualify as a medical or surgical appliance for the purposes of the medical expenses tax offset.

The courts have commented on the phrase 'in respect of' at various times and have found it to have a very wide meaning. Per Mann CJ in Trustees Executors & Agency Co. Ltd. v. Reilly [1941] VLR 110; [1941] ALR 105:

The words 'in respect of' are difficult of definition but they have the widest possible meaning of any expression intended to convey some connection or relation between the subject matters to which the words refer.

In a Board of Review decision ( Case F25 74 ATC 130; (1974) 19 CTBR (NS) 288 Case 43 ) it was held that the phrase 'in respect of' was wide enough to cover maintenance and repair costs as well as the original cost of purchasing the medical or surgical appliance.

When applied to your circumstances, the extended warranty is considered to be part of the original cost of purchasing the hearing aids, while the wax guards, domes, remote control and dehumidifier encompass maintenance and replacement of consumable parts.

It is considered that the phrase 'in respect of' includes the cost of insuring the hearing aids. You have insured your hearing aids under the 'specified portable valuable' section of your policy for replacement or repair in the event of loss or accidental damage. The hearing aids are listed and can be identified as a separate item and charge on your policy. Even though your policy is a general insurance policy which covers home and contents, you will be able to include the portion of the insurance premium which specifically relates to the hearing aids.

Therefore, the expenses in relation to the purchase, replacement of parts and maintenance of your hearing aids qualify as medical expenses for the purposes of medical expenses tax offset.