Edited version of your private ruling

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Ruling

Subject: Work related expenses

Question 1

Are you entitled to a deduction for the cost of the medical exam?

Answer: No.

Question 2

Does the cost of the medical exam qualify as a medical expense for the purpose of a medical expenses tax offset?

Answer: Yes.

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You have a medical condition.

You are a full time driver.

You are required by law to have a medical exam each year to retain your license.

You are not entitled to any rebate through your private health fund or Medicare.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1936 Section 159P.

Reasons for decision

Summary

You are not entitled to a deduction for the cost of the medical exam as the expense is private in nature. However, as it is a medical expense, you can include the cost in a calculation for the purposes of a medical expenses tax offset.

Detailed reasoning

Deduction

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.

The deductibility for expenditure of medical appliances is addressed in Taxation Ruling IT 2217. The ruling discusses whether a medical appliance can be claimed as a work related expense. 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 it was found that the sole purpose of the medical appliance was to aid the taxpayer to overcome his personal disability so that he could earn his assessable income. 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. The expenditure was incurred to help overcome a disability suffered by the taxpayer.

Although your expense is related to medical costs and not medical appliances, the same reasoning used above can be applied to your situation.

You incurred a medical expense to undertake a medical exam to enable you to maintain your license.

The medical exam is a prerequisite to earning your assessable income and not incurred in the course of earning your assessable income.

Consequently, you are not entitled to a deduction as the expense is considered to be private in nature.

Medical expenses tax offset

A medical expenses tax offset is available under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936), where you incur medical expenses in an income year for yourself and/or a dependant who is an Australian resident.

A medical expenses tax offset is only available if the amount of medical expenses (reduced by any entitlement to reimbursement from a health fund or government authority) exceeds $2,000. The tax offset is 20% of the amount by which the net medical expenses exceed $2,000.

Under subsection 159P(4) of the ITAA 1936, medical expenses include, amongst others, payments made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation, or for therapeutic treatment such as speech therapy, which is administered at the direction of a legally qualified medical practitioner.

In your case you incurred an expense for a medical exam performed by a qualified medical practitioner. Therefore the expense can be included in the calculation for a medical expense tax offset.