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Edited version of your written advice
Authorisation Number: 1013091359953
Date of advice: 16 September 2016
Ruling
Subject: Medical expenses
Question 1
Do the expenses incurred for your surgery qualify as an eligible medical expense for the purposes of the medical expenses tax offset?
Answer
No.
Question 2
Are the expenses incurred for your surgery an allowable deduction?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2016
The scheme commenced on
1 July 2015
Relevant facts and circumstances
Your occupation depends on your health and you had difficulty in performing your income producing activity due to a medical condition.
You had surgery to correct this.
You do not have any medical insurance.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 159P
Income Tax Assessment Act 1936 Subsection 159P(1)
Income Tax Assessment Act 1936 Subsection 159P(1B)(a)
Reasons for decision
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.
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 and will change in future income years.
The net medical expenses tax offset (NMETO) is being phased out. From 2015-16 until 2018-19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care.
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.
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 a disability but, generally will not include ordinary household or commercial appliances.
Examples include wheelchairs, walking frames, hearing aids, car controls for the disabled and similar appliances.
These examples are items of property that are manufactured as, distributed as and generally recognised to be an aid to the function or capacity. Anyone with a disability can go to a supplier and purchase these types of items.
Whilst we accept that you underwent a surgical procedure to overcome a medical condition due to your disability, this does not change the fact the payments were made to a hospital and legally qualified medical practitioner in relation to an operation and not an amount paid in relation to a disability aid.
Therefore the costs involved with your operation are not considered to be eligible medical expenses for the purposes of the medical expenses tax offset.
Allowable deductions
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
Generally medical expenses have no direct connection to the gaining or producing of assessable income as the purpose of the expense is to return you to health. The expense relates to a personal medical condition and is private in nature. Although it is acknowledged that you needed the operation in order to continue your occupation, there is insufficient connection to the gaining or production of assessable income for a deduction to be allowed as the expenditure is too remote.