Edited version of private advice

Authorisation Number: 1051649592166

Date of advice: 26 March 2020

Ruling

Subject: Tax offset- net medical expenses

Question

Are the costs associated with your surgery considered to fall within the category of disability aids for the purposes of the medical expenses tax offset?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You suffer from a condition and have done so since birth.

You suffer ongoing issues associated with your condition which have made it increasingly difficult to function.

You work in a physically demanding role.

You have tried conservative treatment methods.

You have had surgical intervention.

You incurred expenses for the surgery.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 159P

Reasons for decision

Summary

You will not be able to claim a net medical expenses tax offset (NMETO) for the 20XX-XX income year as you do not meet the requirements of section 159P of the Income Tax Assessment Act 1936 (ITAA 1936).

Detailed reasoning

A NMETO is available under section 159P of the ITAA 1936.

The NMETO is being phased out. From the 20XX-XX until the 20XX-XX years of income, claims for this offset are restricted to expenses that meet both the existing definition requirements for medical expenses and that relate to disability aids, attendant care or aged care only.

Transitional arrangements will allow taxpayers to claim the offset from the 20XX-XX income year until the end of the 20XX-XX income year, but only for those medical expenses relating to disability aids, attendant care or aged care.

Disability aids

Paragraph 159(1B)(a) of the ITAA 1936 states that for the 20XX-XX to the 20XX-XX 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.

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.

Examples include wheelchairs, walking frames, hearing aids, car controls for the disabled and similar appliances.

To be an aid to function or capacity, the item must help the person with the illness or disability to perform the activities of daily living.

Whilst we accept that there were expenses incurred for surgery to aid with your medical condition this does not change the fact the payments were made to a qualified medical practitioner in relation to surgery and were not incurred in relation to a disability aid.

The legislation is very specific as to the circumstances under which a taxpayer is entitled to a medical expenses tax offset in the 20XX-XX income year due to the legislative changes in relation to the phase out of the offset as mentioned above. The Commissioner is bound by the law and does not have the discretion to allow a claim if the expense does not fall within the legislation.

Therefore the costs involved with your surgery do not fall within the category of disability aids for the purposes of the net medical expenses tax offset.