Edited version of your written advice

Authorisation Number: 1013020838758

Date of advice: 23 May 2016

Ruling

Subject: Net medical expenses tax offset

Question 1

Does the entire cost of the modifications to your home qualify as an eligible medical expense for the purposes of the Medical Expenses tax offset?

Answer

No

Question 2

Do the following out of pocket costs associated with modifying your home qualify as an eligible medical expense when calculating your medical expenses tax offset?

• Chrome grab rails to shower recess area

• Toilet rail alongside WC

• Rail in front of cistern

• Fabricated railing, freestanding alongside bed area

Answer

Yes

This ruling applies for the following period

Year ended 30 June 2013

The scheme commences on

1 July 2012

Relevant facts and circumstances

You were diagnosed with a medical condition in 20XX.

You and your partner purchased a home which would enable you to remain living with your family and continue to work in your home office in your chosen field, as the workplace was no longer suitable.

You carried out extensive modifications to your house to enable wheelchair access, disabled toilet and showering facilities.

The building modifications were recommended by your Occupational Therapist, who was referred by your doctor.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159P(1)

Income Tax Assessment Act 1936 Paragraph 159P(4)

Reasons for decision

Summary

The out-of-pocket costs that relate to the purchase and installation of the grab rails qualify as medical expenses for the purposes of the net medical expense tax offset.

Detailed reasoning

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. The amount of net medical expenses tax offset you can claim will now depend on your level of income.

You will be able to claim an offset of 10% of your net medical expenses over $5,000 if you have an adjusted taxable income (ATI) above:

• $84,000 if you are single, or

• $168,000 if you are a couple or family.

The family threshold will increase by $1,500 for each dependent child after the first.

If your ATI is below these income thresholds, you are not affected by this change and can continue to claim an offset of 20% of your net medical expenses over the indexed threshold amount.

For the 2013 income year the threshold amount is $2,120.

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.  

House and bathroom modifications

You have paid for building and bathroom modifications that have been made to assist with your ability to use the shower, toilet and improve your ease of mobility throughout this area.

Although these modifications are required due to your medical condition, they have a general domestic or household purpose. Building alteration expenses are not payments for an instrument, apparatus or device recognised as an aid to the function or capacity of a disabled person.

Therefore, the modifications to your bathroom are not considered medical or surgical appliances for the purposes of paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936. Accordingly the out-of-pocket costs you have paid in relation to the bathroom modifications are not eligible medical expenses.

Provision of disabled workstation

As the disabled workstation is a support for something that aids your ability in performing daily activities, it does not satisfy the requirements of TR 93/34 and is not considered to be a medical or surgical appliance.

Therefore, the costs of the disabled workstation that you have incurred are not an eligible medical expense.

Grab and support rails

You had out-of-pocket costs for some fixtures that are manufactured and distributed as aids to the function or capacity of a person with a disability or illness. Due to the purpose of the grab rails, the portion of your out-of-pocket cost that relates to the purchase and installation of these items are considered to be a payment in respect of a medical or surgical appliance and is an eligible expense for a the purposes of the medical expense tax offset.

It should be noted that while no breakdown of costs were provided to you in relation to the grab rails the Commissioner will accept an apportionment of expenses made on a fair and reasonable basis