Edited version of your written advice

Authorisation Number: 1013137291816

Date of advice: 8 December 2016

Ruling

Subject: Net medical expenses tax offset

Question

Do your out-of-pocket expenses in relation to your medical procedures qualify for inclusion in the calculation of the net medical expenses tax offset (NMETO)?

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

You are an Australian resident for tax purposes.

You have out of pocket medical expenses in relation to extensive medical procedures.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 159P(1)

Income Tax Assessment Act 1936 paragraph 159P(1B)(a)

Income tax Assessment Act 1936 subsection 159P(1C)

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 or the National Disability Insurance scheme, 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 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. It is considered that medical procedures do not meet the definition of disability aids for the purposes of a medical expense.

The schedule 3 of the explanatory memorandum for the Tax and Superannuation Laws Amendment (2014 Measures No. 1) Act 2014 provides some overview as to what a disability aid is. The act states:

Whether an expense is related to disability aids, attendant care or aged care will largely be a matter of fact and circumstance.  During the phase-out period, additional guidance will be provided by the Australian Taxation Office to assist people with determining whether their expense is eligible to be claimed under the NMETO

The concept of a disability aid, for the purpose of these amendments, is intended to mean an instrument, apparatus, assistance device or any other item of property that is manufactured as, distributed as, or generally recognised to be, an aid to the function or capacity of a person with a disability. 

Therefore, your out-of-pocket medical expenses are not eligible medical expenses for the purposes of the NMETO and you are not entitled to make a claim.