Edited version of your written advice

Authorisation Number: 1012883295392

Date of advice: 24 September 2015

Ruling

Subject: Net medical expenses tax offset

Question 1

Can you claim a deduction for the cost of a swim spa?

Answer:

No.

Question 2

Can the cost of a swim spa be included in a calculation for the medical expenses tax offset?

Answer:

No.

Question 3

Can you claim a medical expenses tax offset in the 20YY-ZZ financial year?

Answer:

No.

This ruling applies for the following period

Year ended 30 June 2015

The scheme commenced on

1 July 20YY

Relevant facts and circumstances

You are an Australian resident for taxation purposes.

You are unable to do weight bearing exercise as you have multiple chronic medical conditions and all your treating professionals recommended that you purchase a swim spa for use as treatment for your condition.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1936 Section 159P

Reasons for decision

Work related deduction

Work-related expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997. This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are of a capital, private or domestic nature.

A swim spa is private and domestic in nature and is not a work related expense. Accordingly you are not entitled to a deduction for the cost of purchasing the swim spa.

Medical expenses tax offset

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, to the extent that they are not reimbursed, or are eligible to be reimbursed, from Medicare and private health insurers.

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.

The amount of any net medical expenses tax offset you can claim also depends on your level of income.

Medical or surgical appliances

Paragraph 159P(4)(f) of the ITAA 1936 defines medical expenses as 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 for the purposes of the medical expenses tax offset. The ruling states that a medical or surgical appliance is an instrument, apparatus or device which is manufactured as, or distributed as, or generally recognised to be an aid to the function or capacity of a person with a disability or an illness. It 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 proposed or used. 

To be an aid to function or capacity, the appliance must help the person with the illness or disability to perform the activities of daily living. An appliance that merely has a therapeutic purpose, such as relieving, healing or preventing a medical condition, is not considered to be a medical or surgical appliance within the meaning of paragraph 159P(4)(f) of the ITAA 1936. 

Swim Spa

In considering whether an item is a medical or surgical appliance, it is the character of the item which is determinative, not the purpose for which it is prescribed or used. While it is acknowledged that swim spa or hydrotherapy pool may aid the function of a person with a disability or illness, the items themselves retain their domestic function of being a spa/swimming pool in a household setting. Their character remains in essence pieces of household utility, and they are not medical or surgical appliances.

Although the spa may be used by persons with a disability or illness, and may improve your mobility and general health, it is not generally distributed as, or generally recognised to be, an aid to the function or capacity of a person with a disability or an illness. 

A list of what is considered not to be a medical or surgical appliance can be found at paragraph nine of TR 93/34. Parts (l) and (m) of paragraph nine specifically names spa pools and swimming pools respectively as not being considered to be a medical or surgical appliance. Part (k) also names hydrotherapy pools as not being considered to be medical or surgical appliances.

As the spa is not a medical or surgical appliance the costs that you paid in relation to the spa do not qualify as medical expenses under subsection 159P(4) of the ITAA 1936. You are therefore not entitled to a medical expenses tax offset for this expenditure.

Eligibility to medical expenses tax offset in the 20ZZ financial year

To be eligible to claim this offset in the 20ZZ financial year, you must have either:

• received this offset in your 20XX and 20YY income tax assessment, or

• paid for medical expenses relating to disability aids, attendant care or aged care.

In your case, you did not receive the medical expenses tax offset in the 20YY financial year. Also as the swim spa is not a medical or surgical appliance it is not considered to be a disability aid. Accordingly you are not entitled to the tax offset in the 20ZZ financial year.