ATO Interpretative Decision
ATO ID 2002/775
Income TaxDeductibility of vaccination expenses - sole trader
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Status of this decision: Decision Current
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Is a sole trader or employer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for medical expenses incurred to vaccinate against Q fever, which is a well recognised occupational hazard in the cattle industry?
Yes. The medical expenses are necessarily incurred in carrying on a business for the purpose of gaining assessable income and are, therefore, deductible in accordance with paragraph 8-1(1)(b) of the ITAA 1997.
The individual operates a business as a sole trader or employer. As a direct consequence of carrying on that business, the individual is regularly exposed to cattle that may be infected with Q fever. Q fever is a well recognised occupational hazard within the cattle industry.
As a result of the probability of coming into direct contact with potentially infected animals, the taxpayer incurred medical expenses to vaccinate against Q fever.
Reasons for Decision
Paragraph 8-1(1)(b) of the ITAA 1997 allows an individual to deduct from his or her assessable income any loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, the loss or outgoing is not deductible if it is of capital, private or domestic nature.
Generally, a deduction is not allowable for the cost of vaccinations to protect against infectious diseases in the work place as this is a personal medical expense and, therefore, of a private nature (see Taxation Ruling TR 95/8 Income Tax: employee cleaners - allowances, reimbursements and work-related deductions). However, in this particular case, the disease being vaccinated against is not one which affects the general community but is restricted to persons who come into close contact with cattle.
In Mansfield v. FC of T 96 ATC 4001; (1995) 31 ATR 367 the Federal Court of Australia decided that expenses of a private or personal nature may be an allowable deduction where the working environment is sufficiently abnormal and unique as to make the essential character of the expenditure work-related rather than private in nature. However, whether such an expense is either private or work-related involves questions of fact and degree, and something out of the ordinary is usually necessary for the essential character of the expenditure to be seen as work-related (see Taxation Ruling TR 2003/16 Income Tax: deductibility of protective items).
In this particular case, it is considered that exposure to Q fever is an incident of working within the cattle industry rather than a more general risk to the public. Therefore, any medical expenses incurred to vaccinate against the risk of contracting Q fever by a sole trader or employer, who carries on a business which involves direct contact with cattle, are regarded as arising from the carrying on of that business. Consequently, the medical expenses are of a business nature and an allowable deduction in accordance with paragraph 8-1(1)(b) of the ITAA 1997.
|Date of amendment||Part||Comment|
|22 September 2017||Issue||Amended for clarity/merged ATO ID 2002/776.|
|Facts||Amended for clarity.|
|Reason for Decision||Amended for clarity.|
|31 January 2014||Reasons for Decision||Amended for clarity.|
|Legislative References||Removed reference.|
|Related Public Rulings||Updated reference.|
Year of income: Year ending 30 June 2002
Income Tax Assessment Act 1997
Mansfield v. FC of T
96 ATC 4001
31 ATR 367
Deductions & expenses
Occupational health & safety expenses
Date reviewed: 13 September 2017