Edited version of private ruling

Authorisation Number: 1011609538086

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Ruling

Subject: Deduction and medical expenses rebate

Question 1

Are you entitled to claim a deduction for the heating costs of your swimming pool?

Answer

No.

Question 2

Are you entitled claim a medical expenses tax offset for the heating costs of your swimming pool?

Answers

No

This ruling applies for the following periods:

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

Year ending 30 June 2014

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You have been diagnosed with a medical condition.

On the advice of your doctor and specialist you are required to do regular exercise, which swimming is the mainstay.

As a result of your exercise program, you have been able to remain in reasonably good condition and remain at work.

You have installed a swimming pool at your residence.

You are investigating the cost of heating the pool in the winter months.

The pool is used solely by you.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1936 Subsection 159P(1)

Income Tax Assessment Act 1936 Subsection 159P(4)

Reasons for decision

Medical expenses deduction

Section 8-1 of the Income Tax Assessment Act 1997 (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) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing assessable 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 can be characterised as being of a private nature and therefore can also be excluded on that ground.

In your case, you have been investigating the cost of heating your swimming pool in the winter months to enable you to swim all year round.

The purpose of the heating costs is to assist you in maintaining your medical condition in order to earn your assessable income. Therefore, it is essentially a prerequisite or something you do before earning your assessable income. It is not incurred in the course of gaining or producing your assessable income.

This expense is also considered private and domestic in nature. Therefore you are not entitled to an outright deduction under section 8-1 of the ITAA 1997 for the heating costs of your swimming pool.

Medical expenses tax offset

A medical expenses tax offset is available to a taxpayer under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays medical expenses in an income year for themselves or a dependant who is an Australian resident, to the extent that they are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund.

The medical expenses tax offset is 20% of the amount by which the net medical expenses exceed $1,500 for the 2009-10 income year. Please note that the threshold amount may change in future income years.

Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the medical expenses tax offset. Paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made 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 an instrument, apparatus or device which is manufactured as, or distributed as, or generally recognised to be an aid to the function or capacity of a person with a disability or illness. The mere fact that an item gives therapeutic treatment, in that it relieves, heals or prevents a medical condition, does not make it a 'medical or surgical appliance'.

This test looks to the character of the appliance, not the purpose for which it is prescribed or used. It is not sufficient that a medical practitioner prescribes an appliance for medical or surgical ends.

Generally, a household or commercial appliance is not a 'medical or surgical appliance'. Their character is usually recognised as being too general to be considered a medical or surgical appliance. For example, a spa bath is used to relieve chronic back pain. The fact that it has a therapeutic purpose does not mean that it is a 'medical or surgical appliance'. A spa bath is generally regarded as being a household appliance and not manufactured or distributed as an aid to the function or capacity of a person with a disability or illness.

Paragraph 9 of TR 93/34 specifically excludes hydrotherapy pools, spa pools and swimming pools as items that are considered to be 'medical or surgical appliances'. Therefore, the cost of the pool and any of its associated running costs do not qualify as eligible medical expenses.

In your case, as a swimming pool is not considered to be a medical or surgical appliance under subsection 159P(4) of the ITAA 1936, the associated costs for the heating of the swimming pool are also considered ineligible as a medical expense and you are unable to include the costs when calculating a medical expenses tax offset.

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