Issue
Are the costs of obtaining general insurance over an electric scooter, that has been prescribed by a medical practitioner for aid in mobilisation, 'medical expenses' as defined in subsection 159P(4) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. The costs of obtaining general insurance over an electric scooter, that has been prescribed by a medical practitioner for aid in mobilisation, are not 'medical expenses' as defined in subsection 159P(4) of the ITAA 1936.
Facts
The taxpayer has difficulty in mobilising and has purchased an electric scooter to aid in mobilisation. The scooter is of a kind specifically designed for the disabled. The taxpayer has also had the scooter registered with the relevant transport authority for on-road use and has taken out a general insurance policy over the scooter
The use of an electric scooter was prescribed by a legally qualified medical practitioner.
Reasons for Decision
Paragraph (f) of the definition of 'medical expenses' in subsection 159P(4) of the ITAA 1936 includes payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner.
Taxation Ruling TR 93/34 explains the meaning of 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.
The electric scooter is therefore a medical appliance as it has been manufactured as, and is generally recognised as, an aid to those people who have a mobility impairment.
As the electric scooter is a medical or surgical appliance prescribed by a legally qualified medical practitioner, payments that are 'in respect of' the scooter will meet the definition of 'medical expenses'.
The courts have commented on the phrase 'in respect of' at various times and have found it to have a very wide meaning. Per Mann CJ in Trustees Executors & Agency Co. Ltd. v. Reilly [1941] VLR 110; [1941] ALR 105: The words 'in respect of' are difficult of definition but they have the widest possible meaning of any expression intended to convey some connection or relation between the subject matters to which the words refer.
Although the courts have held the phrase 'in respect of' to have a wide meaning there still needs to be a sufficient connection between the payment and the use of the medical or surgical appliance. In a Board of Review decision ( Case R12 84 ATC 165; (1984) 27 CTBR (NS) 535 Case 63 ) it was held that the phrase 'in respect of' was not wide enough to cover travelling expenses incurred in order to have a medical or surgical appliance fitted.
It is considered that the phrase 'in respect of' does not include the costs of obtaining general insurance over a medical or surgical appliance such as the scooter. This is because a general insurance policy over the scooter is not necessary in order for the scooter to be used as designed as an aid to mobility. The costs of obtaining the insurance were incurred in order to protect against loss rather than to bring the scooter into a condition where it could be used as a medical appliance.
Therefore, the costs of obtaining general insurance over the scooter are not 'medical expenses' as defined in subsection 159P(4) of the ITAA 1936 and the cost of the general insurance cannot be taken into account in calculating the medical expenses tax offset in section 159P of the ITAA 1936.