Edited version of private ruling

Authorisation Number: 1011861081460

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Ruling

Subject: Medical expenses tax offset

Question

Are the costs of hair removal, purchase and maintenance of a wig, gender feminisation surgery and breast augmentation considered to be medical expenses for the purpose of claiming a medical expenses tax offset?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2011
Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2010

Relevant facts

You have gender identity disorder and have commenced transition to living full time as a female.

You have incurred expenses for laser hair removal and purchase and maintenance of a wig. You will later undergo gender feminisation surgery and breast augmentation.

Your laser hair removal is performed by a legally qualified medical practitioner.

None of the expenses are payable in relation to a professional service for which a Medicare benefit is payable.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159P(1)

Income Tax Assessment Act 1936 Subsection 159P(4)

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

Reasons for decision

Detailed reasoning

A medical expenses tax offset is available under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936), where you pay medical expenses in an income year for yourself and/or a dependant who is an Australian resident.

The medical expenses tax offset is only available if the amount of medical expenses (reduced by any entitlement to reimbursement from a health fund or government authority) exceeds the annual threshold. The tax offset is 20% of the amount by which the net medical expenses exceeds the annual threshold.

Medical expenses are defined in subsection 159P(4) of the ITAA 1936 to include payments to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation (paragraph (a) of the definition).

Laser hair removal

Subsection 159P(4) of the ITAA 1936 defines medical expenses as including therapeutic treatment that is administered by direction of a legally qualified medical practitioner. In the context of this section, therapeutic treatment involves the exercise of professional skill in the medical field in a way which normally involves the person administering the treatment using drugs, physical or mental processes for the purpose of curing or managing medical conditions. In your case, the treatment you have undertaken for your hair removal has been provided by a legally qualified medical practitioner. However, it is not undertaken to cure or manage a medical condition.

Therefore, the cost of your hair removal treatment does not constitute a medical expense as defined in subsections 159P(4) and (5) of the ITAA 1936.

Wig

Paragraph 159P(4)(f) of the ITAA 1936 provides the definition of 'medical expenses' and includes 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 states that an appliance is an aid to function or capacity if it helps the person with the disability or illness to perform the activities of daily living. 

This definition looks 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.

The definition of medical or surgical appliance includes:

Medical or surgical wigs for use by a person which is necessitated by loss of hair through sickness or disease (other than naturally occurring baldness) or the effects of the treatment of sickness or disease.

An example provided in TR 93/34 at paragraphs 23 and 24 is a woman who suffers from a disease that causes baldness.  She suffers extreme embarrassment and psychological stress associated with baldness.  The woman's doctor advises her that she should wear a wig. If the wig is a medical or surgical wig and relieves potential incapacity it is a medical or surgical appliance.  A medical or surgical wig is made to measure and has a special type of construction.

Medical or surgical wigs which are custom made would qualify as a medical or surgical appliance. Paragraph 9 of TR 93/34 outlines articles which are not medical or surgical appliances, of which a cosmetic wig is one.

Therefore, the cost for the purchase and maintenance of your wig does not constitute a medical expense as defined in subsections 159P(4) and (5) of the ITAA 1936.

Gender feminisation surgery and breast augmentation

Paragraph 159P(4) of the ITAA 1936 defines 'ineligible medical expenses' as payments to a legally qualified practitioner, nurse or chemist, or a public or private hospital, in respect of a cosmetic operation that is not a professional service for which a Medicare benefit is payable. This provision applies to medical expenses paid from 1 July 2005 for the 2006 income year and forward.

In determining whether an operation is 'cosmetic' the Commissioner must consider the ordinary meaning of the word (paragraph 4.18 of the Explanatory Memorandum to the Tax Laws Amendment (2005 Measures No 6) Bill 2005 (the EM)).

Paragraph 4.19 of the EM refers to the following definition of cosmetic in The Macquarie Dictionary:

· serving to beautify; imparting or improving beauty, especially of the complexion

· designed to effect superficial alteration while keeping the basis unchanged.

In order for this definition of cosmetic to be satisfied, it is sufficient that either part of the definition is met.

In your case, you will undergo gender feminisation surgery and breast augmentation for which no Medicare benefit is payable. Gender feminisation surgery and breast augmentation are considered a cosmetic operations as it effects a superficial alteration while keeping the basis unchanged. Accordingly, the expenses are not considered to be medical expenses for the purpose of calculating a medical expenses tax offset.