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Edited version of your written advice
Authorisation Number: 1051201490652
Date of advice: 13 March 2017
Ruling
Subject: Net Medical Expenses Tax Offset
Question 1
Is the cost of a non-cosmetic surgery implant a disability aid for the purposes of NMETO?
Answer
No.
Question 2
Are additional medical costs related to the surgery regarded as eligible medical expenses for NMETO purposes?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commences on:
1 July 2014
Relevant facts and circumstances
You were diagnosed with cancer requiring surgery.
You subsequently had the cancer removed as a precautionary measure.
You had replacement implants.
You have had further physiotherapy related to your surgery due to lymph nodes and related tissue.
This is ongoing.
Relevant legislative provisions
section 159P of the Income Tax Assessment Act 1936
Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014
Reasons for decision
Questions 1 and 2
Net Medical Expenses Tax Offset (NMETO)
The net medical expenses tax offset is being phased out. Many items and services that may previously have been considered eligible medical expenses are no longer allowable.
Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014 amended section 159P of the Income Tax Assessment Act 1936 to phase out the 'Net Medical Expense Tax Offset'.
Subsection 159P(1B) of the Income Tax Assessment Act 1936 was inserted as a result of the amendment. Subsection 159P(1B) 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:
(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.
Based on your circumstances paragraph 159P(1B)(a) of the ITAA 1936 would be the only provision where your expenses can be considered. Our consideration is outlined below.
The Explanatory Memorandum to the amending legislation states:
3.25 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 ATO finds some guidance from the drafting instructions behind the amendment to section 159P which states:
Disability aids
25. 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.
26. 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, hearing aids and car controls for the disabled.
These examples are instruments, apparatus or devices that are manufactured as, distributed as and generally recognised to be an aid to the function or capacity. People 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. They are an item that is supplied by the legally qualified medical practitioner as part of the operation.
We acknowledge that you underwent a surgical procedure to overcome a traumatic medical condition and further to rectify the resultant disfigurement of that medical condition. However, the payments were made to a hospital and legally qualified medical practitioner in relation to your surgical implants, and an operation to permanently insert those implants is not considered 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 NMETO.
Similarly, the additional costs you have incurred in relation to your physiotherapy are not considered a disability aid and as such are not considered to be eligible medical expenses for the purposes of the NMETO.