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Ruling

Subject: Deductions - travel expenses

Question 1:

Are you entitled to a deduction for travel expenses incurred to go to your medical practitioner for treatment?

Answer:

No

Question 2:

Are you entitled to a deduction for travel expenses incurred to go to your medical practitioner solely to obtain a medical report and/or certificate as required by the insurance company paying you assessable salary continuance payments?

Answer:

Yes

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commences on:

01 July 2010

Relevant facts and circumstances

You receive income from a salary continuance insurance policy which was provided through your employer.

The payments were paid through your employer until you ceased to work.

Once you stopped working, the payments were made direct to you from the insurance company.

In order to continue getting these insurance payments, you are required to see your treating practitioners.

If you do not attend the doctors, you are not paid.

The insurance company allows you to see a doctor of your choice.

You currently attend the doctors twice a week.

The doctor provides you with a certificate and at times provides a report for the insurance company when they require it.

You generally travel from home, but have on occasions travelled from work to an appointment then home.

You will continue to receive payments until such time as you return to work full time or until you reach the compulsory retirement age.

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 ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236).

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 case, in that you are required to fulfil certain requirements to continue to be eligible to receive assessable income, namely continue to see your treating medical practitioner and undergo treatment. As such, it can be said that the expenses for the doctor are expenses incurred to establish and retain your salary continuance payments.

However, travel to the place of study was not specifically considered in the Anstis case and if it were, the issue of whether or not the travel could be considered to be private in nature would need to have been addressed to determine its deductibility.

The Commissioner's view, as stated in Taxation Ruling IT 2199, is that the expenses incurred in travelling from home to work are not deductible as they are outgoings of a private nature. The High Court has stated in relation to 'home to work' travel: '...it may be said to be a necessary consequence of living in one place and working in another...' (per Williams, Kitto and Taylor JJ in Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478 at 501; (1958) 11 ATD 404 at 414).

Travel undertaken to receive medical treatment for a work-related injury was discussed in Rossitto v. FC of T 98 ATC 2093 (Rossitto). In this case, the taxpayer severely damaged his knee in a work-related injury and liability was accepted for compensation. The taxpayer argued that the cost of regular travel by motor vehicle to his doctor, physiotherapy treatment and specialist doctors was necessarily incurred in deriving the compensation income. He further argued that the payment of compensation was conditional on the maintenance of a rehabilitation program.

However, the claim for travel costs failed as they did not have the required nexus with the derivation of assessable income and were found to be of a private or domestic nature. It was difficult to separate the private and personal nature of medical treatment and its relationship with the derivation of income. The case concluded that, in the same way as travelling to a place of employment is not deductible, travel to receive medical treatment, even if it could be said that such medical treatment is a prerequisite to earning income is equally non-deductible.

The difficulty of separating the private nature of receiving medical treatment from the relationship attending the medical practitioner has to the derivation of assessable income is arguably not present if the visit does not involve the receipt of any actual treatment. Should the purpose of the trip be solely to allow a certificate to be issued or a report obtained, as required by the payer of your salary continuance benefits, then arguably this is not private in nature and that travel would be deductible.

In your case, you are required to go to your medical practitioner for treatment in order to continue getting your salary continuance payments.

As highlighted in the Rossitto case, the cost of travel to receive medical treatment is considered private in nature and not deductible. Accordingly, you are not entitled to a deduction for any of the travel expenses that you have incurred to go to your medical practitioner for treatment.

However, if you undertake travel solely to acquire a certificate and/or report from your medical practitioner, as required by the insurance company, (that is, no actual medical treatment is received) then the cost of that travel is considered to be deductible against the assessable salary continuance benefit you receive.