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Ruling

Subject: Medical expenses tax offset

Question 1: Do the costs directly attributable to the purchase and installation of a fold down rear entry ramp qualify as medical expenses for the purposes of the medical expenses tax offset?

Answer: Yes.

Question 2: Do the remaining costs associated with converting your motor vehicle, for either driving or travelling as a passenger, qualify as medical expenses for the purposes of the medical expenses tax offset?

Answer: No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

You suffer from a disability.

In the 2010-11 financial year you purchased a new motor vehicle and had it modified to enable you to access the vehicle while remaining in your electric wheelchair.

You incurred conversion costs consisting of the basic conversion fee and optional extras. The basic conversion fee included the costs of the fold up rear entry ramp.

The conversion reduces the eight seater capacity to a four seat capacity and reduced the value of the vehicle.

You submit that the electric wheelchair restraints and ramp system are necessary given your need for independence and the fact that your spouse could not perform these tasks manually.

Relevant legislative provisions

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

Reasons for decision

Subsection 159P(3A) of the ITAA 1936 provides that a tax offset is allowable to a taxpayer whose net medical expenses in the year of income exceed the threshold.

The medical expenses must be paid by the taxpayer in respect of themselves or their dependant. 'Dependant" is defined to include the spouse of the taxpayer.

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.

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.

Fold down rear entry ramp

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:

   ... 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 down 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 down 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 portion of the payment that relates to the rear entry ramp is therefore in respect of a medical or surgical appliance for the purposes of paragraph 159P(4)(f) of the ITAA 1936.

Please note that while no breakdown of costs was provided to you in relation to the basic conversion the Commissioner will accept an apportionment of expenses made on a fair and reasonable basis

Car conversion expenses

The remaining costs associated with the modification to the vehicle will be eligible to be included in your calculation of the medical expenses tax offset if they are deemed to be payments in respect of a medical or surgical appliance.

The car 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 entry ramp. The next question is whether the payments for the modifications to the car in preparation for the installation of the ramp 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; (1984) 27 CTBR (NS) 535 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 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'.

The payments for the modifications relate to either reconfiguring the car in preparation for the installation of the fold down 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, all conversion expenses, apart from those attributable directly to the entry ramp, do not qualify as medical expenses under paragraph 159P(4)(f) of the ITAA 1936.