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Edited version of your written advice
Authorisation Number: 1013125498250
Date of advice: 17 November 2016
Ruling
Subject: Net medical expenses tax offset - disability aids
Question 1
Is an artificial implant a disability aid?
Answer
No
Question 2
Are you entitled to a medical expenses tax offset?
Answer
No
This ruling applies for the following period
Year ended 30 June 20YY
The scheme commences on
1 July 20XX
Relevant facts and circumstances
You were diagnosed with a disease.
You have had operations to remove the diseased part and replace it with an implanted artificial part. Your daily living would be impaired without these operations.
The procedures were carried out in a hospital by a legally qualified medical practitioner.
You have not been allowed a medical expenses tax offset in 2012-13 and 2013-14 financial years.
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
The net medical expenses tax offset (NMETO) is being phased out between the 2013-14 and 2018-19 financial years and eligibility for this offset has changed.
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.
In addition, for the 2013-14 and 2014-15 income years, taxpayers will be eligible to claim the full range of medical expenses (as defined currently) but only if they have received an amount of the net medical expenses tax offset in the previous income year (or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 income year).
In your case you did not receive an amount of the NMETO in your 2013 and 2014 income tax assessments so you are limited to claims relating to disability aids, attendant care or aged care only.
Disability aids
Based on your circumstances paragraph 159P(1B)(a) of the ITAA 1936 would be the only provision where your expenses can be considered. Paragraph 159P(1B)(a) 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 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. However, when it comes to artificial devices or appliances used in operations, these items cannot be purchased by a patient on their own, nor can they be sold by that person. They are an item that is supplied by the legally qualified medical practitioner as part of the operation.
In your case, you have incurred costs in relation to operations to restore and preserve your ability to function day to day. Your diagnosed condition and subsequent restoration procedure is not considered to be a disability aid for the purposes of the medical expense tax offset.
Accordingly, you are not able to include the costs for your operations in calculating a medical expense tax offset.