Issue
Is the taxpayer entitled to a medical expenses tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) for the costs incurred in transporting an artificial limb for repairs?
Decision
No. The taxpayer is not entitled to a medical expenses tax offset under section 159P of the ITAA 1936 for the costs incurred in transporting an artificial limb for repairs as they are not 'in respect of' an artificial limb for the purposes of paragraph 159P(4)(e) of the ITAA 1936.
Facts
The taxpayer has an artificial limb.
The artificial limb developed a problem which needed to be corrected by the manufacturer.
The taxpayer incurred costs in transporting the artificial limb to the manufacturer to enable the repairs to be done.
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 $1,500.
The medical expenses must be paid by the taxpayer in respect of themselves or their dependant.
The term 'medical expenses' is defined in subsection 159P(4) of the ITAA 1936. Paragraph (e) of that definition includes payments made 'in respect of an artificial limb (or part of a limb)'.
The scope of the phrase 'in respect of' for the purposes of paragraph 159P(4)(e) of the ITAA 1936 was dealt with in Case R12 84 ATC 165; 27 CTBR (NS) Case 63 . The Tribunal held that the costs incurred by the taxpayer in transporting his son to enable artificial limbs to be fitted, did not fall within the definition of medical expenses in paragraph 159P(4)(e) of the ITAA 1936. The Tribunal found that whilst the expenditure could be regarded as a cost incurred to enable the artificial limbs to be fitted, the travel expenses could not be seen as a cost incurred 'in respect of ' the artificial limbs themselves.
This taxpayer incurred costs in transporting their artificial limb to the manufacturer for correction of the problem with that limb. The costs of transporting an artificial limb for repairs are similar in nature to the cost of transporting a limb for fitting purposes. Whilst it may be necessary to transport the artificial limb to facilitate the repairs, the transport expense cannot be seen as a cost in respect of the artificial limb itself.
The transport costs are not incurred 'in respect of' the artificial limb for the purposes the definition of medical expenses in paragraph 159P(4)(e) of the ITAA 1936.
Accordingly, the taxpayer is not entitled to a medical expenses tax offset under section 159P of the ITAA 1936 for the costs incurred in transporting an artificial limb for repairs.