Edited version of private advice

Authorisation Number: 1012629114243

Ruling

Subject: Medical expenses tax offset - wheelchair access modification

Question 1

Does the entire cost of the modifications made to your motor vehicle qualify as an eligible medical expense for the purposes of the medical expense tax offset?

Answer

No.

Question 2

Do the following costs associated with modifying your motor vehicle qualify as eligible medical expenses for the medical expenses tax offset?

• fold down ramp

• automatic entry ramp system

• labour charges for the above items

Answer

Yes.

This ruling applies for the following period

Year ending 30 June 2014

The scheme commences on

1 July 2013

Relevant facts and circumstances

You are an Australian resident for tax purposes.

You suffer from a medical condition that affects your mobility and as a result you are permanently confined to a wheelchair.

Your legally qualified medical practitioner prescribed modifications to your motor vehicle to meet your disability needs.

You obtained and accepted a quote for a wheelchair access modification to your vehicle.

You were not provided with a breakdown of the costs of the basic conversion. The basic conversion is shown as a packaged lump sum amount with the optional extras itemised separately.

The modifications included the purchase and installation of a fold down ramp which is manufactured and sold specifically to allow wheelchair access to a motor vehicle.

Other modifications included:

n low floor modification - (to enable the installation of the ramp)

n fitting of a new fuel tank

n modification to the rear suspension

n modification of the exhaust system

n fitting of a full underbody safety cage

n fitting of reverse parking sensors

n fitting of a fold down forward facing rear seat

n automation of the ramp

n installing a locking plate to lock the wheelchair in position, and

n fitting of four anchor belts and anchor points to secure the wheelchair

The amount charged for the conversion also included the engineering certification (Australia wide), weighbridge ticket, three year or 60,000km limited warranty on the conversion (whichever comes first subject to conditions) and labour costs.

When you are travelling as a passenger the ramp enables you to get into and out of the vehicle whilst remaining in your motorised wheelchair.

You have paid for the cost of the conversion and have not received any reimbursement of the cost.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

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

A medical expenses tax offset is available under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays eligible medical expenses in an income year for themselves or a dependant who is an Australian resident.

The medical expenses tax offset is only available if the amount of medical expenses, after being reduced by any entitlement to reimbursement from a health fund or government authority such as Medicare, exceeds the threshold amount. This includes any financial assistance received under a government or not-for-profit funded program.

The amount of net medical expenses tax offset you can claim now depends on your level of income as the rebate is now income tested. This not only affects the threshold amount but also the percentage of the rebate you can claim. It should also be noted that the threshold amount is subject to indexation and will change in future income years.

Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the medical expenses tax offset. Paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner.

Taxation Ruling TR 93/34 Income tax: medical expense rebate - meaning of medical or surgical appliance explains the meaning of 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.

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. It is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends.  

Therefore the question is whether the payments you have made for the wheelchair access modifications to your vehicle are payments made in respect of a medical or surgical appliance.

Fold down ramp and automation of the ramp system.

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…

In your case, you have paid for wheelchair access modification to your vehicle in order to access it as a passenger while remaining in your motorised wheelchair.

The fold down rear entry 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 motor vehicle.

It assists your ability to perform activities of daily living; that is, travelling in a passenger vehicle. The fold down ramp is similar in nature to the chair lift in case D37; it has the character of an aid to the function or capacity of a person with an illness or disability.

As for the automation of the fold down ramp, this expense is considered to be made in respect of the ramp which is a medical appliance.

The portion of the payment that relates to the ramp and the automation of the ramp is therefore in respect of a medical or surgical appliance and is an eligible expense for the purposes of the medical expense tax offset

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

Further modifications to the vehicle

While the amounts paid for the purchase and installation of the ramp and it's automation are an eligible medical expense, it must be determined whether the portion of the other costs that relate to modifying your vehicle were 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'.

ATO Interpretive Decision ATO ID 2010/47 Income Tax - Medical expenses tax offset: cost of reconfiguring a standard car in preparation for the installation of medical or surgical appliances, considered a case where the taxpayer paid to modify their vehicle to enable a fold down ramp to be installed. The taxpayer's spouse suffered from a physical disability and the taxpayer's doctor recommended the modifications to the vehicle to allow the taxpayer's spouse to be able to access the vehicle. The required modifications included:

• cutting and lowering the floor of vehicle to enable the installation of the wheelchair ramp

• modifying the suspension to cater for the new configuration

• moving and modifying the petrol tank

• seating variations

• installing special locking plates to lock the wheelchair in position

• installing seat belts and

• laying new carpet to cater for new configuration.

In this case it was determined that the modifications above did not replace or alleviate an absent or impaired bodily function or medical defect. They related to either reconfiguring aspects of the vehicle in preparation for the installation of medical or surgical appliances, or meeting safety requirements. The modifications did not qualify directly as medical or surgical appliances themselves under paragraph 159P(4)(f) of the ITAA 1936.

Your situation is similar to the taxpayer in ATO ID 2010/47. In your case, in addition to installing a ramp, your vehicle required a number of modifications to facilitate the installation of the ramp. The modifications related to either reconfiguring the vehicle in preparation for the installation of the ramp, ensuring the car complies with the Australian Design Rules or meeting normal safety requirements. It is accepted that the amounts paid were 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 amounts you have paid for the modifications to the motor vehicle (that is, other than the installation of the rear entry fold down ramp and its automation) do not qualify as eligible medical expenses for the purposes of the medical expenses tax offset.