Edited version of your private ruling

Authorisation Number: 1012457462178

Ruling

Subject: Medical expenses

Question

Are your establishment costs and on-going costs associated with the use of equipment at home for treatment of an illness considered medical expenses for the purposes of the medical expense tax offset?

Answer

No

This ruling applies for the following period

Year ending 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

Late in the relevant year you were diagnosed with an illness.

After completion of training, equipment was installed in your home.

The installation of the equipment allows you to undertake treatment at home.

A room within your home had been set up specifically for this purpose.

The major equipment and consumables are provided by the Health Department and rebates are available for the additional costs of electricity and water used during the treatment process.

Additional expenses not covered by Medicare or private health insurance have also been incurred, these include:

· Establishment costs of setting up the room

· On going costs

Relevant legislative provisions

Income Tax Assessment Act 1936, subsection 159P(4)

Income Tax Assessment Act 1936, paragraph 159P(4)(f)

Reasons for decision

A medical expenses tax offset is available to a taxpayer under section 159P 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.

The medical expenses tax offset is means tested from 1 July 2012. Where your adjusted taxable income is above the Medicare Levy Surcharge (MLS) thresholds ($84,000 for singles and $168,000 for couples or families in 2012-13) you may claim a tax offset of 10 per cent for eligible out of pocket expenses in excess of $5,000. Where your adjusted taxable income is below that of the MLS threshold you may claim a tax offset of 20% for the net medical expenses over $2,120 for the 2012-13 income year.

Subsection 159P(4) of the ITAA 1936 defines 'medical expenses' and included in the definition in paragraph 159P(4)(f) are 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 'medical or surgical appliance'.

Paragraph 3 of the ruling states that a 'medical or surgical appliance' for the purposes of the definition of 'medical expenses' in subsection 159P(4) is an instrument, apparatus or device which is:

a) manufactured as; or

b) distributed as; or

c) generally recognised to be

 an aid to the function or capacity of a person with a disability or illness.

This definition looks to the character of the appliance, not the purpose for which it is prescribed or used. The following points are also made:

· An appliance is an aid to function or capacity if it assists or improves a person's abilities in performing activities of daily living when he/she in fact suffers from a disability.

· Generally, a household or commercial appliance is not a 'medical or surgical appliance.' 

The character of an appliance cannot be altered by either the recommendation of a physician or the taxpayer's purpose in purchasing and using it.

The items you have purchased to set up the room for treatment and the consumable items that you purchase on an on-going basis do not have the character of a 'medical or surgical appliance'. These items have not been manufactured as or distributed as or generally recognised to be an item to achieve a medical or surgical end. The character of these items cannot be altered by your purpose for purchasing and using them.

In your case the items purchased for the setup of the room and on-going use would not be considered a 'medical or surgical appliance' and therefore would not form part of your medical expenses for the purposes of the medical expenses tax offset.