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Ruling

Subject: Medical expenses

Question

Are you entitled to a deduction for the cost of your hearing aids?

Answer

No.

This ruling applies for the following period

Year ending 30 June 2012

Year ending 30 June 2013

The scheme commenced on

1 July 2011

Relevant facts

You work in a particular field and your daily duties include listening to customers, vendors and internal staff.

This communication is either in person or by telephone.

You have been diagnosed with significant hearing loss.

The hearing loss has a dramatic effect on your daily role in your field.

To improve your hearing you have to be fitted with hearing aids.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

A deduction is not available for the expenditure incurred in purchasing your hearing aids, as the expenses are considered to be private in nature.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 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.

In Ronbipon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] ALR 875; (1949) 23 ALJ 139, the High Court of Australia stated that in order for expenses to be allowable as deductions, the expenses must be incidental and relevant to the gaining of the assessable income. Whether this connection exists is a question of fact to be determined by reference to all the facts of the particular case.

In Case Q17 83 ATC 62; Case 82 26 CTBR (NS) 556, the taxpayer was a primary producer who had purchased a hearing aid so that his business associates could communicate with him in the day to day running of the business. The taxpayer argued that the hearing aid was an essential tool to enable him to carry on his business.

The Board of Review disallowed the deduction. It was held that despite the connection between the outlay of the taxpayer and the taxpayer's income, the outlay was not necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. The primary cause of the expenditure was for the correction of a disadvantage that was personal to the taxpayer. The expense was therefore of a private nature.

Taxation Ruling IT 2217 Income tax deductions: medical appliances, provides further guidance regarding the extent to which taxpayers suffering from physical disabilities are entitled to income tax deductions for expenditure on medical appliances such as hearing aids, used by them in the course of gaining or producing assessable income.

Paragraph 7 of IT 2217 states that the principles emerging from the various decisions apply to similar situations where taxpayers are required to use some type of medical device or surgical appliance to overcome a physical disability. Accordingly, claims for income tax deductions in respect of expenses incurred on medical appliances, for example, wheelchairs, hearing aids, spectacles, artificial limbs and similar appliances used by persons in carrying out their duties of an employment are not allowable.

In your case, you need to purchase hearing aids to assist you in your job. In light of the principles outlined above, the costs of hearing aids are private in nature. The expenses are not considered to be incurred in gaining your assessable income, but rather incurred in overcoming a medical condition. Therefore, you are not entitled to claim a deduction for this expenditure as it is private in nature.

Additional information

Although payments in respect of hearing aids are not deductible, they do qualify as medical expenses for the purposes of calculating a medical expenses tax offset. More information about the medical expenses tax offset can be found on our website, ato.gov.au or on pages 55 and 56 of the TaxPack 2011 Supplement.

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