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Authorisation Number: 1011934470248

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Ruling

Subject: expenses for prosthetic limb

Question: 1

Are you entitled to a deduction for the replacement of a prosthetic limb?

Answer: No

Question: 2

Are you entitled to include the cost of a prosthetic limb in a calculation for medical expenses tax offset?

Answer: Yes

Relevant facts

You have had a prosthetic limb fitted for some time. This allowed you to carry on your business.

In 2011 you needed a new prosthesis to replace the original.

You have been rated as a very high activity level prosthetic user. Your profession requires you to wear a high-end prosthesis for stability and easily mobility.

The type of prosthesis you have purchased is the only one available which will allow you to use the tools of your trade with safety.

The cost of the prosthesis was not available for reimbursement by Medicare or a private health fund.

Reasons for decision

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.

Medical expenses have no direct connection to the gaining or producing of assessable income. They can be characterised as being private in nature, and this excludes a deduction for work related purposes.

While we recognise that your particular prosthesis allows you greater movement and therefore an ability to carry out your work with greater safety, it does not have protective qualities and is not designed specifically for your occupational conditions. Additionally, it is suitable for normal private use.

There is insufficient connection to the gaining or production of assessable income as the expenditure is too remote and the expense is private in nature.

It is considered that the costs incurred do not have the necessary connection with the earning of your assessable income and therefore are not deductible under section 8-1 of the ITAA 1997.

Medical expenses tax offset

Subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides a tax offset for amounts paid by a taxpayer as medical expenses in respect of himself/herself or in respect of a dependant who is a 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.

Paragraph 159P(4) of the ITAA 1936 defines medical expenses as payments including payments in respect of an artificial limb (or part of a limb), artificial eye or hearing aid.

The costs you have incurred for the prosthetic limb therefore qualify as medical expenses for the purpose of calculating the medical expenses tax offset under section 159P of the ITAA 1936.