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Ruling

Subject: Deductions - travel expenses to attend medical appointment

Question:

Are you entitled to a deduction for all of your travel expenses incurred for the purpose of acquiring a medical certificate to satisfy a requirement for you to receive worker's compensation payments?

Answer:

No

This ruling applies for the following period:

Year ending 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are in receipt of worker's compensation payments as a result of a work-related injury.

A condition to receiving these payments is that you are required to visit a doctor every six months to obtain a medical certificate.

During the financial year you travelled to another city to visit family and see your doctor to obtain the medical certificate required by the insurance company.

Whilst on the trip you stayed with family.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1.

Reasons for decision

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.

A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997, it must have the essential character of an outgoing incurred in gaining assessable income (Lunney v. FC of T, Hayley v. FC of T (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166) and there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income.

Where multiple purposes or objects for incurring the expense exist, an apportionment of the expense may be necessary (Ronpibon Tin NL v. FC of T (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236).

Ure v. F.C. of T 81 ATC 4100; (1981) 50 FLR 219 (Ure) also discusses this issue of apportionment and found:

…it would be a misleading half-truth to say that the object which the taxpayer had in mind or the advantage which he sought in incurring the liability to pay interest at rates of 7.5% or more was the derivation by him of interest at the rate of 1% per annum by re-lending the money which he borrowed.

That was, no doubt, an object which the taxpayer had in mind: it was an advantage which he sought. In the circumstances however, characterization of the outgoing cannot properly be effected by reference to that object or advantage alone.

A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense.

In Commissioner of Taxation v. Anstis (2010) 241 CLR 443; (2010) 2010 ATC 20-221; (2010) 76 ATR 735 (Anstis), the Court considered the deductibility of expenses incurred by the taxpayer in undertaking her study which was a requirement to her receiving the Youth Allowance. It was found that the reason for the taxpayer incurring the expenses was not determinative of the question whether they were incurred in gaining or producing the youth allowance. The occasion of her study expenses was to be found in what she did to establish and retain her statutory entitlement to the receipts.

Your case can be likened to the Anstis, in that you are required to fulfil certain requirements in order for you to receive your worker's compensation payments. The criteria that must be satisfied is that you are required to obtain a medical certificate from a doctor every six months to be entitled to the worker's compensation payments. As such, it can be said that the expenses for the doctor are expenses incurred to establish and retain your entitlement to your worker's compensation payments.

In your situation, you travelled to another city so that you could visit family and also see your doctor to obtain a medical certificate.

Taking this into account, it is considered that you went on this trip for purposes other than to only obtain a medical certificate.

Taxation Ruling TR 98/9 deals with the deductibility of self-education expenses. While this ruling is not specific to your circumstances, it does provide an example where expenses relating to two purposes are apportioned. Paragraph 70 of TR 98/9 states as follows:

70. Example: Francesco, a paediatrician, has 2 equal purposes when he decided to attend a five-day international conference on paediatrics in Singapore to be followed by a seven-day holiday in Thailand. The conference package is $2,500 ($1,000 return air fare, $500 for the cost of the conference and $1,000 for accommodation and meals at the conference venue). Francesco paid another $2,000 for accommodation, meals and car hire for the 7 day holiday in Thailand. Francesco is allowed a deduction of $1,500 for the conference cost and the accommodation and meals expenses at the conference. Only half of the return air fare ($500) is allowed as the expense was incurred for two equal purposes, one income-earning and the other private. The other expenditure of $2,000 relating to the holiday in Thailand is private in nature and not allowable as a deduction.

As it is considered that your airfare expenses were incurred for purposes or objects other than to only obtain a medical certificate, the expenses must be apportioned between those purposes or objects accordingly. As there are two purposes or objects for incurring the expenses, it is appropriate that these expenses are apportioned equally and you are therefore entitled to a deduction for half the cost of your airfare under section 8-1 of the ITAA 1997.

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