ATO Interpretative Decision

ATO ID 2010/47 (Withdrawn)

Income Tax

• This ATO ID is withdrawn. Guidance on the Net Medical Expenses Tax Offset can be found at Medical expenses on the ATO website (QC 31918).
  This document has changed over time. View its history.

Issue

Do expenses incurred in reconfiguring a standard car in preparation for the installation of medical or surgical appliances qualify as medical expenses under paragraph 159P(4)(f) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

No. Expenses incurred in reconfiguring a standard car in preparation for the installation of medical or surgical appliances do not qualify as medical expenses under paragraph 159P(4)(f) of the ITAA 1936.

Facts

The taxpayer's spouse suffers from a physical disability, which affects the spouse's mobility, and results in the spouse being confined to a wheelchair.

The taxpayer's general practitioner recommended that the taxpayer's standard car should be modified to enable the taxpayer's spouse to get into and out of the car while remaining in their wheelchair.

The taxpayer intended to install a fold down ramp into the car which would allow their spouse to access the car while remaining in their wheelchair.

In order to prepare the car for the installation of the ramp the car has to be modified.

The required modifications included:

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cutting and lowering the floor of vehicle to enable the installation of the wheelchair ramp;

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modifying the suspension to cater for the new configuration;

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moving and modifying the petrol tank;

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seating variations;

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installing special locking plates to lock the wheelchair in position;

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installing seat belts; and

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laying new carpet to cater for new configuration.

The fold down ramp is a medical or surgical appliance for the purposes of paragraph 159P(4)(f) of the ITAA 1936.

Reasons for Decision

Subsection 159P(3A) of the ITAA 1936 provides that a tax offset is allowable to a taxpayer whose net medical expenses in the year of income exceed $1500.

The medical expenses must be paid by the taxpayer in respect of themselves or their dependant. 'Dependant" is defined to include the spouse of the taxpayer.

The term 'medical expenses' is defined in paragraph 159P(4)(f) of the ITAA 1936 to include payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner.

Taxation Ruling TR 93/34 describes a 'medical or surgical appliance' as being an instrument, apparatus or device which is manufactured, distributed or generally recognised as an aid to the function or capacity of a person with a disability or an illness.

Taxation Ruling TR 93/34 also provides that generally a household or commercial appliance is not a 'medical or surgical appliance' and that we need to look at the character of the appliance, not the purpose for which it is prescribed or used.

The question therefore is whether the payments made in modifying the taxpayer's car were payments in respect of a medical or surgical appliance.

The car itself is not a medical or surgical appliance. While some of the individual modifications may qualify as an 'appliance' they do not qualify as a medical or surgical appliance. The modifications made are not themselves an aid to the disabled person's function or capacity.

They do not replace or alleviate an absent or impaired bodily function or medical defect. They relate to either reconfiguring aspects of the vehicle in preparation for the installation of medical or surgical appliances, or meeting safety requirements. The modifications do not qualify directly as medical or surgical appliances themselves under paragraph 159P(4)(f) of the ITAA 1936.

In the circumstances here the medical or surgical appliance is the fold down ramp. The next question is whether the payments for the modifications to the car in preparation for the installation of the ramp are payments 'in respect of' a medical or surgical appliance.

Although the courts have held the phrase 'in respect of' to have 'the widest possible meaning of any expression intended to convey some connection or relation between the subject matters' (per Mann CJ in Trustees Executors & Agency Co. Ltd. v. Reilly [1941] VLR 110; [1941] ALR 105), there still needs to be a connection between the subject matters.

In Case R12 84 ATC 165; (1984) 27 CTBR (NS) 535 Case 63, the Board of Review held that travel expenses incurred in order to have artificial limbs fitted were not payments relating to the artificial limbs themselves, and therefore were not payments in respect of an artificial limb as required under paragraph 159P(4)(e) of the ITAA 1936. The Board found that it was difficult to establish a connection between the subject matters being the travel costs and the artificial limbs. In the course of their decision, the Board accepted that the phrase 'in respect of' in the context of subsection 159P(4) of the ITAA 1936 does not extend to payments that are made 'because of', 'arising out of' or 'in connection with'.

The payments for the modifications relate to either reconfiguring the car in preparation for the installation of the fold down ramp, or meeting normal safety requirements. It is accepted that the costs were incurred because of or in connection with and as part of the preparation for the installation of the ramp. However they were not payments made 'in respect of' the ramp itself.

Consequently, the expenses incurred by the taxpayer on the modifications made in preparation for the installation of the medical appliance do not qualify as medical expenses under paragraph 159P(4)(f) of the ITAA 1936.

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1936
   section 159P
   subsection 159P(3A)
   subsection 159P(4)
   paragraph 159P(4)(f)

Case References:
Trustees Executors & Agency Co Ltd v Reilly
   [1941] VLR 110
   [1941] ALR 105

Related Public Rulings (including Determinations)
Taxation Ruling TR 93/34

Related ATO Interpretative Decisions
ATO ID 2002/852
ATO ID 2006/250

Keywords
Medical & surgical appliances
Medical expenses
Medical expenses rebates

Business Line:  Small Business/Individual Taxpayers

Date of publication:  19 February 2010

ISSN: 1445 - 2782