Edited version of your private ruling

Authorisation Number: 1012498426558

Ruling

Subject: Medical and travel expenses

Question 1

Are you entitled to a deduction for the fees paid to obtain a medical report which is required for you to continue receiving your income protection payments?

Answer

Yes.

Question 2

Are you entitled to a deduction for the travel and carer expenses incurred to go to your medical practitioner solely to obtain a medical report as required by the insurance company paying you the assessable income protection payments?

Answer

Yes.

Question 3

Are you entitled to a deduction for doctor's fees, travel and carer expenses incurred to go to your medical practitioners for treatment?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You are receiving income protection payments.

A condition to receiving your payment is that you obtain a monthly medical report.

You pay a monthly fee to gain a medical report to be able to get your monthly payments. When you visit the medical practitioner to obtain the report, you do not receive treatment. The sole purpose of your visit is to obtain the medical report.

You have travel expenses for travel to and from the medical practitioners.

You also pay a carer to look after you when attending medical appointments.

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.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

· it must have the essential character of an outgoing incurred in gaining

assessable income or, in other words, of an income-producing expense

(Lunney v. FC of T; (1958) 100 CLR 478 (Lunney's case)),

· 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), and

· it is necessary to determine the connection between the particular outgoing

and the operations or activities by which the taxpayer most directly gains or

produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v.

FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

Generally medical expenses have no direct connection to the gaining or producing of assessable income and a deduction is not allowable. Medical expenses are usually a prerequisite to the earning of assessable income and relate to a personal medical condition and are private in nature.

In Commissioner of Taxation v. Anstis (2010) 241 CLR 443; (2010) 2010 ATC 20-221; (2010) 76 ATR 735 (Anstis case), 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 protection payments, namely obtain monthly reports from a medical practitioner. As such, it can be said that the expenses for the report are expenses incurred to establish and retain your income protection payments. Therefore you are entitled to a deduction for the fee paid to your medical practitioner to receive the required medical report.

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. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. Such expenses are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction.

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 income protection payments, 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 to obtain a monthly medical report in order to continue getting your income protection payments. During these visits you do not receive medical treatment.

As you undertake the travel solely to acquire a medical 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 income protection payments you receive.

Similarly, carer expenses for the travel to the medical practitioner for the sole purpose in obtaining the medical report are also an allowable deduction.

However, 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 travel or carer expenses incurred to go to your medical practitioner for treatment.