Edited version of private ruling

Authorisation Number: 1011679916125

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Ruling

Subject: medical expenses

1. Do the expenses incurred in modifying a standard car in preparation to installing a fold out ramp to provide wheelchair access to a car qualify as medical expenses?

No.

2. Do the expenses incurred in installing a fold out ramp to provide wheelchair access to a car qualify as medical expenses?

Yes.

This ruling applies for the following period

Year ended 30 June 2006

Year ended 30 June 2007

The scheme commenced on

1 July 2005

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are fully dependent upon a wheelchair for mobility.

You purchased and modified a car to allow you rear entry wheelchair access to the car.

The modifications were done to install a fold out ramp to the rear of the vehicle.

You incurred costs associated with the modifications and the installation of the fold out ramp in the years ended 30 June 2006 and 30 June 2007.

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 payments for the modification of your car in preparation to installing a fold out ramp are not considered to be in respect of a medical or surgical appliance. They cannot be included in calculating your entitlement to a medical expenses tax offset in the year in which the expenses were incurred.

A fold out ramp is considered to be a medical or surgical appliance. Therefore the payments for its purchase and installation can be included in calculating your entitlement to a medical expenses tax offset in the year in which the expenses were incurred.

Detailed reasoning

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 $1,500.

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.

Cost of modifying a car in preparation to installing a fold out ramp

The question is whether the payments made in modifying your car were payments in respect of a medical or surgical appliance.

The car, in itself, is not a medical or surgical appliance. While some of the individual modifications may qualify as an 'appliance' they do not qualify as a medical or surgical appliance. The modifications made are not themselves an aid to the disabled person's function or capacity.

They do not replace or alleviate an absent or impaired bodily function or medical defect. They relate to either reconfiguring aspects of the vehicle in preparation for the installation of medical or surgical appliances, or meeting safety requirements. The modifications do not qualify directly as medical or surgical appliances themselves under paragraph 159P(4)(f) of the ITAA 1936.

In the circumstances here the medical or surgical appliance is the fold out ramp. The next question is whether the modifications to the car in preparation of the installation of the ram are 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; 27 CTBR (NS) 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 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 from' or 'in connection with'.

The payments for the modifications relate to either reconfiguring the car in preparation for the installation of the fold out 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 incurred by you in preparation for the installation of the fold out ramp do not qualify as medical expenses under paragraph 159P(4)(f) of the ITAA 1936.

Purchase and installation of a fold out ramp

The question is whether payments to purchase and install a fold out ramp which allows wheelchair access to a car were in respect of a medical or surgical appliance.

In Case D37 72 ATC 210; (1972) 18 CTBR (NS) Case 7 (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...

The fold out 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 the person's ability to perform one of the activities of daily living, that is, travelling in or driving a passenger vehicle. In these circumstances the fold out 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 a fold out ramp is therefore in respect of a medical or surgical appliance for the purposes of paragraph 159P(4)(f) of the ITAA 1936.