Edited version of private advice

Authorisation Number: 1012639919456

Ruling

Subject: Medical expense tax offset

Question 1

Are amounts paid to legally qualified medical practitioners, specialist practitioners, therapy sessions where the taxpayer has been referred to a particular therapist for treatment which is administered under the direction of the legally qualified medical practitioner considered to be eligible medical expenses for the purposes of the medical expense tax offset where you meet the transitional criteria for the 2012-13 to 2014-15 financial years?

Answer

Yes.

Question 2

Are amounts paid for electric/manual wheelchairs and their maintenance and parts, slide sheet, transfer board, hoist, shower/toilet commode, hoist, specialised harness for a treadmill, purchase and installation of a wheelchair hoist fitted to a motor vehicle (direct costs) and it's servicing costs and personal and respite care considered to be eligible medical expense for the purposes of the medical expenses tax offset for the 2012-13 to 2017-18 financial years?

Answer

Yes.

Question 3

Do the following expenses qualify as eligible medical expenses for the purposes of the medical expense tax offset?

• Treadmill

• Tablet

• Dragon naturally speaking speech recognition software

• Anchor points and engineering certification certificate

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

The scheme commences on

1 July 2012

Relevant facts and circumstances

You are an Australian resident for tax purposes.

Your child suffered from a condition which affects their mobility and as a result they are permanently confined to a wheelchair and require full-time care.

Your child's overall care is administered by a hospital rehabilitation paediatrician in conjunction with your legally qualified medical practitioner and specialist.

Both the hospital and the other legally qualified medical practitioners have referred your child to various therapists for therapeutic treatment to assist with your child's conditions. The therapists report back to the referring practitioner on your child's progress and the hospital, and legally qualified medical practitioners all report regularly to each other in regards to the treatment plan and the progress of your child.

Your child visits a physiotherapist, occupational therapist and psychologist for therapeutic treatment on a regular basis.

Your legally qualified medical practitioners have prescribed the use of various disability aids and other items to assist with the care of your child over the years. These items need to be replaced from time-to-time due to wear and tear and safety reasons.

The items that require replacing are listed below:-

• Treadmill with a specialised harness

• Hoist

• Shower/toilet commode

• Electric/manual wheelchair

• Slide sheet

• Transfer board

• Tablet and associated software

• Wheelchair hoist fitted to a motor vehicle- this is for the purchase and installation costs of the wheelchair hoist as well as the anchor points, and engineering certification certificate. This will enable your child to gain access to the motor vehicle whilst remaining in their wheelchair

The wheelchair hoist, electronic wheelchair and manual wheelchair require regular servicing. You have out-of-pocket expenses for their maintenance and parts.

You have out-of-pocket expense for personal care and in-home respite care for your child.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P

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.

It should be noted that the net medical expenses tax offset is being phased out between the 2013-14 and 2018-19 financial years.

Transitional arrangements will allow taxpayers to claim the offset from the 2013-14 financial year until the end of the 2018-19 financial year, but only for those medical expenses relating to disability aids, attendant care or aged care.

In addition, for the 2013-14 financial year and 2014-15 financial year, taxpayers will be eligible to claim the full range of medical expenses (as defined currently) but only if they have received an amount of the net medical expenses tax offset in the previous financial year (or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 financial year).

In order to claim the tax offset, the expenditure must fall within the definition of 'medical expenses' as contained in subsection 159P(4) of the ITAA 1936.

Therefore, we have to determine whether the payments you have made qualify as medical expenses for the purposes of the medical expense tax offset.

Payments made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation

Payment made to general practitioners and paediatricians fall within the definition of 'medical expenses' as they are payments made to a legally qualified medical practitioner in respect of an illness.

These payments are considered to be eligible medical expenses and the net amount can be included in your calculation of the medical expense tax offset between the 2012-13 and 2014-15 financial years where you meet the transitional criteria discussed above.

Payments for therapeutic treatment administered by direction of a legally qualified medical practitioner

In order to qualify for the tax offset such payments must meet the following conditions:-

• they are for therapeutic treatment and

• the therapeutic treatment is administered by the direction of a legally qualified medical practitioner.

The mere suggestion or recommendation by a medical practitioner that the patient undergoes therapeutic treatment is not sufficient for the payment to qualify as medical expenses. The patient would have to be referred by a medical practitioner to a particular person for specific treatment.

Although the treatment must be administered by direction of a legally qualified medical practitioner, the treatment need not be administered by such a practitioner.

Your child's overall care is administered by the children's hospital paediatrician in conjunction with your general practitioner and specialist. Both the hospital and the other legally qualified medical practitioners have referred your child to various therapists for therapeutic treatment to assist with your child's conditions.

The therapists report back to the referring practitioner on your child's progress and hospital and medical practitioners report regularly to each other in regards to the treatment plan and the progress of your child.

It is considered that the payments you make to the physiotherapist. occupational therapist and the psychology clinic all fall within the definition of 'medical expenses' as they are payments made for therapeutic treatment administered by direction of a legally qualified medical practitioner.

These payments are considered to be eligible medical expenses and the net amount can be included in your calculation of the medical expense tax offset between the 2012-13 and 2014-15 financial years where you meet the transitional criteria discussed above.

Payments 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.

In your case your child is permanently confined to a wheelchair and requires full-time care. Your legally qualified medical practitioner has prescribed the use of various disability aids to assist with the care of your child over the years. These items need to be replaced from time-to-time due to wear and tear and safety reasons.

The electric and manual wheelchairs, hoist, slide sheet, transfer board, specialised harness fitted to the treadmill, wheelchair hoist fitted to a motor vehicle (purchase and installation costs) and shower/toilet commode are items that are manufactured specifically as an aid to assist with the everyday activities of daily living for persons with a disability.

Previous case law has interpreted the phrase 'payment in respect of' as being wide enough to cover maintenance or repair as well as the original cost of the medical or surgical appliance.

Therefore, the items listed above as well as any maintenance and repairs that may be required are considered to be eligible medical expense and you can include your out-of-pocket expenses in your calculation of the medical expense tax offset.

Tablet and Dragon naturally speaking speech recognition software

The tablet and software you have purchased consist of everyday items and are advertised and available for sale to the general public.

Therefore, these items are not considered to be medical or surgical appliances and do not qualify as eligible medical expenses for the purpose of the medical expenses tax offset.

Treadmill

Even though the treadmill is used as part of an exercise routine to aid with your child's circulation and has a therapeutic purpose it does not meet the requirements of a medical or surgical appliance as it retains its character of a commercial or household appliance and it is not manufactured, distributed or recognised to be aids to function or capacity of a person with a disability.

Therefore, the treadmill is not considered to be medical or surgical appliances and does not qualify as eligible medical expenses for the purpose of the medical expenses tax offset.

Wheelchair hoist, anchor points and engineering certification certificate

The wheelchair hoist 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. The hoist has the character as an aid to the function or capacity of a person with a disability.

The portion of your payment that relates to the purchase and installation of the hoist is therefore in respect of a medical or surgical appliance for the purposes of the medical expense tax offset.

However, the portion of the payment that relates to the anchor points and engineering certification certificate are costs in relation to ensuring that the car complies with the Australian Design Rules or meeting normal safety requirements and are not payments made 'in respect of' the hoist itself.

The anchor points and engineering certification certificate do not qualify as eligible medical expense for the purposes of the medical expenses tax offset.

Payments made as remuneration for services rendered by a person as an attendant of a person with a disability

Under the legislation, payments that are made to a person for services rendered by them to a person with a disability are considered to be an eligible medical expense.

In your case your child is permanently confined to a wheelchair and requires 24 hour personal care.

The payments you make to for personal care and in-home respite care are considered to be an eligible medical expense and you are entitled to include these amounts in your calculation of the medical expense tax offset.