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Edited version of private ruling
Authorisation Number: 1011501973503
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Ruling
Subject: Claiming medical fees as work related expenses
Question and answer
Are you entitled to claim the cost of surgery as a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts and circumstances
You are employed as an instructor.
In order to train, assess, maintain a training organisation status, you require a certificate which is issued by a relevant authority in your state.
You were unable to renew your certificate because of your failure to pass a test.
You were stood down from all positions and your status was suspended.
Later you had a successful operation.
After the operation, your certificate was revalidated, you had your position reinstated and your status approved.
You incurred medical fees in relation to the operation.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 23 ALJ 139; 78 CLR 47; 8 ATD 431 the High Court stated that:
For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing assessable income it must be incidental and relevant to that end. The words incurred in gaining or producing the assessable income mean in the course of gaining or producing such income.
Medical expenses have no direct connection to the gaining or producing of assessable income. The purpose of the expense is to return the taxpayer to health. There is insufficient connection to the gaining or production of assessable income for a deduction to be allowed as the expenditure is too remote. In addition, medical expenses are private in nature and therefore are also be excluded on that ground.
In your case, you state that in your work as an instructor. You are required to employ a level of health. To overcome this issue and safely continue your employment you underwent surgery.
We have given consideration to these facts; however, safety concerns and the fact you are better able to earn your assessable income because of the surgery, do not alter the essential character of the expense. That is, the medical expenses are private in nature. Consequently, the expenditure is not deductible under section 8-1 of the ITAA 1997.
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