Edited version of private ruling

Authorisation Number: 1011602677060

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Ruling

1. Are you entitled to a deduction for the cost of your cosmetic surgery?

No.

2. Are you entitled to include the cost of your cosmetic surgery when calculating a medical expenses tax offset?

No.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts and circumstances

You work as an actor.

You have had a cosmetic surgery procedure.

You were not eligible for any Medicare benefit for surgery.

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 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.

In your case, although you believe the cosmetic surgery may help to improve your income earning activities, this does not change the private nature of the expenses incurred.

You are therefore not entitled to a deduction for the medical expenses incurred in undergoing the cosmetic surgery under section 8-1 of the ITAA 1997 because there is an insufficient connection between the costs of the surgery and the derivation of your income from your employment, and the expense is considered private in nature.

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.

You can include medical expenses relating to an illness or operation paid to legally qualified doctors, nurses or chemists and public or private hospitals. However, expenses for some cosmetic operations are excluded.

Expenses which do not qualify as medical expenses include payments made for cosmetic operations for which a Medicare benefit is not payable.

In your case, you underwent cosmetic surgery for which no Medicare benefit was payable. Under subsection 159P(4) of the ITAA 1936, your expenses are considered ineligible as a medical expense and you are unable to include the associated costs when calculating a medical expenses tax offset.