Edited version of your written advice

Authorisation Number: 1012994411406

Date of advice: 8 April 2016

Ruling

Subject: Medical expenses

Question

Can you include the payments made for home modifications in your medical expenses tax offset calculation?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 20WW

Year ended 30 June 20XX

The scheme commenced on

1 July 20VV

Relevant facts

You have an illness. You are wheelchair bound and had to make modifications to your home.

You had a ramp installed at your home to allow wheelchair access.

You had bathroom modifications to allow commode access to the shower.

You had an air conditioner installed as you are unable to regulate body temperature.

The ramp or other modifications were not prescribed by a legally qualified medical practitioner.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 159P

Detailed reasoning

A medical expenses tax offset is available under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where you pay certain medical expenses in an income year for yourself or a dependant who is an Australian resident, to the extent that you are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund.

Under changes to the legislation, the medical expenses tax offset is being phased out. The changes apply from 1 July 2013.

For the 20VV-WWfinancial year, the term "medical expenses" as defined in sub-section 159P(4) of the ITAA 1936 is relevant. Paragraph (f) of the definition includes payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner.

The ramps were installed in the 20VV-WW financial year, however it was not prescribed by a legally qualified medical practitioner. Therefore the cost of the ramps are not regarded as eligible medical expenses for the purposes of calculating your medical expenses tax offset and cannot be included.

To be eligible to claim the medical expenses tax offset in 20WW-XX, you must have either:

• received the offset in your 20VV-WW income tax assessment, or

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

If you received this offset in your 20VV-WW income tax assessment, there is no change to the types of net medical expenses that you can claim.

If you did not receive this offset in your 20VV-WW income tax assessment, you can only claim net medical expenses relating to disability aids, attendant care or aged care.

Subsection 159P(1B) of the ITAA 1936 states that:

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:

(a) relates to an aid for a person with a disability; or

(b) relates to services rendered by a person as an attendant of a person with a disability; or

(c) relates to care provided by an approved provider (within the meaning of the Aged Care Act 1997) of a person who:

(i) is approved as a care recipient under that Act; or

(ii) is a continuing care recipient within the meaning of that Act.

You did not receive a medical expenses tax offset in your 20VV-WW income tax assessment. Consequently, for 20WW-XX you can only claim net medical expenses relating to disability aids, attendant care or aged care. We therefore need to consider whether your costs for the bathroom modifications and air conditioner are regarded as disability aids.

Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014 amended section 159P of the ITAA 1936 to phase out the 'Net Medical Expense Tax Offset'.

As highlighted in the Explanatory Memorandum to the amending legislation, whether an expense is related to disability aids will largely be a matter of fact and circumstance. The concept of a 'disability aid', for the purpose of these amendments, is intended to mean an instrument, apparatus or device that is manufactured as, distributed as, or generally recognised to be, an aid to the function or capacity of a person with a disability.

It is the character of the item that is important rather than the purpose for which it is used. A disability aid would be considered to be an 'aid to function or capacity' if it helps a person in performing activities of daily living or provides assistance to alleviate the effect of the disability. Examples include wheelchairs, walking frames and hearing aids.

You have incurred expenses for bathroom modifications to assist with your ability to access and use your bathroom and shower.

Although the bathroom modifications are required due to your medical condition, they have a general domestic or household purpose. Building alteration expenses are not considered to be payments for a disability aid. Therefore, the modifications to your bathroom are not considered to be medical expenses for section 159P of the ITAA 1936 purposes.

Similarly, an air conditioner is a general household appliance which is not manufactured, distributed or generally recognised to be an aid for a person with a disability. The purpose of an air conditioner installed in rooms is to add to the comfort of the occupants and would be properly described as a household appliance rather than a disability aid. Although the air conditioner was installed for medical reasons, it is not regarded as a disability aid and does not qualify as a medical expense for the purpose of section 159P of the ITAA 1936.

Your specific circumstances are acknowledged, however, the legislation does not allow a medical expenses tax offset for the above modifications to your home.