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Edited version of private ruling
Authorisation Number: 1011619503046
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Ruling
Subject: work related expenses
Are you entitled to a deduction for the cost of your cosmetic surgery?
No.
This ruling applies for the following periods:
Year ended 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
The scheme commenced on:
1 July 2009
Relevant facts
You are a performing artist.
You have had cosmetic surgery performed to enhance your physical appearance.
You will require further surgery in the future to maintain the effects of the earlier surgery.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 25-10
Income Tax Assessment Act 1997 Division 40
Income Tax Assessment Act 1997 Section 40-30.
Reasons for decision
Summary
The surgery performed to enhance your physical appearance is considered to be private in nature. Therefore, you are not entitled to a deduction for the cost of your surgery.
Detailed reasoning
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 N.L.Tongkah Compound N.L. v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236 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.
Generally, medical expenses have no direct connection to the gaining or producing of assessable income. In the majority of cases, cosmetic surgery is performed to beautify or enhance a person's general appearance. 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 Case U83 87 ATC 481, orthodontic expenses incurred by a trombone player to correct a drift in teeth alignment were held to be of a private nature and not deductible. This was notwithstanding that the expense may be needed, necessary or even intended to assist in the derivation of income: refer Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 ATR 166.
Taxation Ruling TR 95/20 sets out deductions relating to employee performing artists. It states that a deduction is not allowable for the costs of maintaining general fitness or body shape.
In your case, although you believe the purpose of the surgery may help to improve your income earning activities, this does not change the private nature of the expenses incurred.
The cost of surgery is considered to be a private expense and not allowable under section 8-1 of the ITAA 1997.
Depreciating assets
Division 40 of the ITAA 1997 provides a deduction for the decline in value of depreciating assets based on their effective life.
A depreciating asset is defined in section 40-30 of the ITAA 1997 as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used.
Depreciating assets include such items as computers, electric tools, furniture and motor vehicles.
The human body does not satisfy the definition of a depreciating asset. Therefore, you are not entitled to depreciate the cost of your surgery.
Repairs
Section 25-10 of the ITAA 1997 allows a deduction expenditure you incur for repairs to premises (or part of premises) or a depreciating asset that you held or used solely for the purpose of producing assessable income.
As stated above the human body is not considered to be a depreciating asset. Therefore, you are not entitled to a deduction for repairs under section 25-10 of the ITAA 1997.
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