Edited version of your written advice

Authorisation Number: 1012862051903

Date of advice: 18 August 2015

Ruling

Subject: Net Medical Expense Tax Offset

Question 1

Can a net medical expense tax offset be claimed in the year ended 30 June 2015 if you had no entitlement to the offset in the preceding years?

Answer

No

Question 2

Is an in vitro fertilization (IVF) treatment considered to be an aid for a person with a disability for the purpose of determining the entitlement to the net medical expense tax offset?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2015.

The scheme commenced on:

1 July 2014

Relevant facts and circumstances

Your spouse has undertaken in vitro fertilization (IVF) treatment in order to increase the likelihood of conceiving. As a result you have incurred significant costs in the 2014-15 income year because of the treatment undertaken.

Your income tax assessments for the years ended 30 June 2013 and 2014 did not include the net medical expense tax offset.

You state that the struggle to conceive is a form of disability which should be recognised because not being able to have children affects the mental well-being as well as the day to day lives of the people involved.

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 tax offset is income tested. The percentage of net medical expenses you can claim and the threshold amount is determined by your adjusted taxable income (ATI) and family status. It should also be noted that the threshold amount is subject to indexation.

The net medical expenses tax offset (NMETO) is being phased out between the 2013-14 and 2018-19 income years and eligibility for this offset has changed restricting who can claim and what type of medical expenses can be claimed.

Transitional arrangements will allow taxpayers to claim the offset from the 2013-14 income year until the end of the 2018-19 income year, but only for those medical expenses relating to disability aids, attendant care or aged care, regardless of whether they have received an amount of the NMETO in the previous year.

In addition, for the 2013-14 and 2014-15 income years, taxpayers will be able to claim the full range of medical expenses but only if they have received an amount of the NMETO in the previous year. Thus for the NMETO to be claimable for medical expenses including but not restricted to, disability aids, attendant care or aged care, incurred in the 2014-15 income year, you must have received the particular offset in both the 2012-13 and 2013-14 income years.

In your case, you have not received any amount for the NMETO in your 2012-13 or 2013-14 income tax assessments so you are accordingly limited to claims for medical expenses relating to disability aids, attendant care or aged care only in your 2014-15 assessment.

Based on your circumstances paragraph 159P(1B)(a) of the ITAA 1936 would be the only provision where your expenses can be considered. This paragraph states:-

For the 2013-14 to 2018-19 years of income, an amount that would otherwise be paid as medical expenses is treated as not being paid as medical expenses unless the payment relates to an aid for a person with a disability.

A person who is considered to be disabled is entitled to claim the cost of a disability aid towards meeting the net medical expense relevant threshold. This is provided that the aid is designed to be an 'aid to function or capacity'. That is, the aid must help a person in performing activities of daily living or provides assistance to alleviate the effect of the disability.

A disability aid for the purpose of this offset is an instrument, apparatus or device generally recognised to be an aid to improve the function or capacity of a person with a disability.

The purchase of a wheelchair or the maintenance of a guide dog are examples of disability aids as they help a person's daily living activities, provide assistance to alleviate the effect of the disability and enable increased participation in society.

A disability is defined as a restriction or impairment which has lasted or is likely to last, for a period of six months or more, and which restricts a person's every day activities. Such as:

loss of sight (not corrected by glasses or contact lenses)

loss of hearing where communication is restricted, or an aid to assist with, or substitute for, hearing is used

speech difficulties

chronic or recurrent pain or discomfort causing restriction

shortness of breath or breathing difficulties causing restriction

blackout, fits or loss of consciousness

difficulty learning or understanding

incomplete use of arms or fingers

incomplete use of feet or legs

nervous or emotional condition causing restriction

restriction in physical activities or in doing physical work

disfigurement or deformity

mental illness or condition requiring help or supervision

long-term effects of head injury, stroke or other brain damage causing restriction

receiving treatment or medication for any other long-term condition or ailment, and still restricted

any other long-term condition resulting in a restriction.

Disability aids are items of property manufactured as, distributed as, or generally recognised to be, an aid to the function or capacity of a person with one or more of the above disabilities. Examples of disability aids include wheelchairs, walking frames, hearing aids, car controls for the disabled and similar appliances.

Disability aids, however, do not include medical or surgical procedures.

Whilst we accept that infertility is an illness within the ordinary meaning, this does not change the fact that the payments, in your case, were made to a hospital and a legally qualified medical practitioner in relation to a medical or surgical procedure, namely an in vitro fertilization (IVF) program and were not an paid in relation to the alleviation of a disability by means of an aid that has been created for that purpose.

For these reasons the costs incurred as a result of your spouse's IVF procedures cannot be considered to be a disability aid for the purposes of calculating the NMETO.