Edited version of your written advice

Authorisation Number: 1051519063349

Date of advice: 21 May 2019

Ruling

Subject: Deductibility of medical aids

Question

Is the medical aid deductible under section 8-1of the Income Tax Assessment Act 1997?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2019

The scheme commences on:

1 July 2018

Relevant facts and circumstances

You currently work as a professional within this role you are required to use an array of heavy and light plant items over a long period of time and a variety of workshop equipment and tools.

You have incurred significant damage to your hearing that has resulted in hearing loss.

Due to the significant hearing loss you have been required to purchase a medical aid.

The benefit of the hearing device at work is being more aware of sounds in the working environment including:

● warning alarms on reversing vehicles

● approaching machinery

● counteracting the tinnitus whilst at work.

The hearing device has the added benefit of blue tooth connectivity so you can be contacted at any time whilst undertaking your work duties.

You have provided documentation from your Specialist stating the benefits of the hearing device that will combat hearing loss, the main benefit of the device is to make you more aware of sounds in the environment and relieve anxiety at work and at home.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

The expense is related to a personal medical condition and correction of your hearing is private in nature. Although it is acknowledged that you needed the hearing device in order to continue your work as a grounds keeper, deductions for expenses of a private nature are specifically excluded under paragraph 8-1(2)(b) of the Income Assessment Act 1997 (ITAA 1997).

Detailed reasoning

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 or are necessarily incurred in carrying on a business for the purpose of 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, or a provision of the ITAA 1997 prevents it.

Taxation Ruling IT 2217 Income tax deductions: medical appliances, income tax deductions in respect of medical appliances and various case decisions in relation to medical expenses

IT 2217 provides at paragraphs 4 to 6:

In Hayley and Lunney v. FCT (1958) 100 CLR 478, the High Court held that the cost of travel to and from work was not an allowable income tax deduction. Similarly in Lodge v. F.C. of T. 72 ATC 4174, (1972) 3 ATR 254, the High Court held that child minding expenses were not an allowable income tax deduction. In both the cases the Court recognised that the expenditures were incurred for the purpose of earning assessable income and were an essential prerequisite to the derivation of that income. However, the expenditures were not incurred in the actual gaining of the assessable income and, for that reason, did not qualify for income tax deduction.

The same reasoning applies to expenses associated with the provision and maintenance of medical appliances. Claims for income tax deduction in respect of medical appliances have been considered by Taxation Boards of Review on a number of occasions. In Case P31 82 ATC 141; Case 96 25 CTBR (NS) 715, a quadriplegic law lecturer was not allowed an income tax deduction for depreciation, maintenance and insurance on a motorized wheelchair which he used 75% of the time in connection with his employment. Similarly, in Case Ql7 83 ATC 62; Case 82 26 CTBR(NS) 556, a farmer was denied the cost of a hearing aid which he claimed was an essential tool in carrying on his business.

In both cases the Board found that the sole purpose of the wheelchair or hearing aid was to aid the taxpayer in overcoming his personal disability in order that he could earn his assessable income. The Board concluded that, although the taxpayer might be unable to earn his assessable income without the aid of the relevant appliance, the outlay on the appliance was not incurred in gaining assessable income or carrying on a business for that purpose, but rather was incurred to help overcome an unfortunate disability suffered by the taxpayer.

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 under sub-sections 51(1), 53(1) and 54(1) in respect of expenses incurred on medical appliances, e.g. wheelchairs, hearing aids, spectacles, artificial limbs and similar appliances used by persons in carrying out the duties of an employment are not allowable. These classes of expenditure would normally qualify as medical expenses for concessional expenditure rebate purposes.

Case Q17 83 ATC 62 has a direct nexus with your current circumstances. The tax payer was a primary producer who purchased a hearing aid so that 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 a personal to the taxpayer. The expense was therefore of private in nature.

In your case, the expense is related to a personal medical condition and correction of your hearing is private in nature. Although it is acknowledged that you needed the hearing device in order to continue your work as a professional, deductions for expenses of a private nature are specifically excluded under paragraph 8-1(2)(b) of the ITAA 1997.

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