Edited version of your written advice

Authorisation Number: 1012690224889

Ruling

Subject: Hearing aids and related expenses

Question 1

Are you entitled to a deduction for the cost of your hearing aids and related expenses?

Answer

No.

Question 2

Is the cost of purchasing hearing aids and related expenses eligible medical expenses for the purposes of the medical expense tax offset?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commences on

1 July 2013

Relevant facts and circumstances

You are an Australian resident for tax purposes.

You work as an employee.

As part of your employers workplace health and safety policy you are required to attend a company appointed medical practitioner for a 'Health Assessment' to assess your fitness to work.

The doctor that examined you stated that due to a medical condition, you were required to wear hearing aids.

The legally qualified medical practitioner referred you to be fitted for hearing aids.

It is a condition of your employment that you meet the medical criteria as set out in the appropriate standards and that you comply with any recommendations mentioned in the report.

You have provided a letter from your employer confirming that you are required to wear a hearing aid device as a condition of your employment.

You wear the hearing aids for work only.

You have out-of pocket medical expenses in relation to the purchase of your hearing aids, repairs and maintenance and consumables.

You did not receive an amount of the net medical expenses tax offset in your 2012-13 income tax assessment.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1936 Subsection 159P(1)

Income Tax Assessment Act 1936 Paragraph 159P(1B)(a)

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.

Generally medical expenses have no direct connection to the gaining or producing of assessable income. The medical expense relates to a personal medical condition and is private in nature. 

Taxation Ruling IT 2217 Income tax deductions: medical appliances addresses income tax deductions for medical appliances It refers to the decisions in Case Q17 83 ATC 62; Case 82 26 CTBR (NS) 556 and in Case P31 82 ATC 141; Case 96 26 CTBR (NS) 715 where it was found that the sole purpose of a wheelchair or hearing aid was to aid the taxpayer in overcoming a personal disability in order to earn assessable income. 

The court held that although the taxpayer might be unable to earn the assessable income without the aid of the relevant appliance, the outlay on the appliance was not incurred in gaining the assessable income but rather was incurred for the correction of a disadvantage that was personal to the taxpayer. The expense was therefore of a private nature.

In Case V9 88 ATC 149, the chairman of a committee of inquiry sought a deduction for the cost of a hearing aid he purchased to help him cope with the public hearings of the inquiry. The taxpayer argued that the hearing aid was essential for the particular type of work he undertook, and that while the hearing aid was useful at large gatherings, he did not use it for normal conversation in his private life.

The Administrative Appeals Tribunal disallowed the claim. It was held that although the hearing aid was mainly used during employment, the need for it arose because of a personal disability of the applicant. The expense was therefore private in nature and consequently non-deductible.

Accordingly, claims for income tax deductions in respect of expenses incurred on medical appliances, for example, wheelchairs, hearing aids, spectacles, artificial limbs and similar appliances used by persons in carrying out their duties of an employment are not allowable.

In your case it is a condition of your employment that you wear a hearing aid device at work. This situation can be compared to the holding of a current driver's licence as a condition of employment.

While the holding of a driver's licence may be a condition of employment, it does not follow that the licence fees are deductible.

The right to drive on the public roads does not cease to be a private right merely because you are employed in some capacity which involves the use of the public road system.

In Case R49 84 ATC 387; 27 CTBR (NS) Case 104, it was held that even though travel was an essential element of the work to be performed by the taxpayer, a driver's licence was still an expense that was private in nature and the cost was not an allowable deduction under section 8-1 of the ITAA 1997.

In light of the principles outlined above, the costs of hearing aids and related expenses are private in nature. The expenses are not considered to be incurred in gaining your assessable income, but rather incurred in overcoming a medical condition. Therefore, you are not entitled to claim a deduction for this expenditure as it is private in nature.

However, expenditure on the hearing aids and related expenses may qualify for the medical expense tax offset.

Net medical expenses tax offset (NMETO)

A medical expenses tax offset is available under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays eligible medical expenses in an income year for themselves or a dependant who is an Australian resident.

The medical expenses tax offset is only available if the amount of medical expenses, after being reduced by any entitlement to reimbursement from a health fund or government authority such as Medicare, exceeds the threshold amount.

This tax offset is income tested. The percentage of net medical expenses you can claim and the threshold amount is determined by your adjusted taxable income (ATI) and family status. It should also be noted that the threshold amount is subject to indexation and will change in future income years.

The net medical expenses tax offset (NMETO) is being phased out between the 2013-14 and 2018-19 financial years and eligibility for this offset has changed.

Transitional arrangements will allow taxpayers to claim the offset from the 2013-14 income year until the end of the 2018-19 income year, but only for those medical expenses relating to disability aids, attendant care or aged care.

In addition, for the 2013-14 and 2014-15 income years, taxpayers will be eligible to claim the full range of medical expenses (as defined currently) but only if they have received an amount of the net medical expenses tax offset in the previous income year (or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 income year).

In your case you have not received an amount of the NMETO in your 2012-13 income tax assessment so you are limited to claims relating to disability aids, attendant care or aged care only.

Hearing Aids and related expenses

For the 2013-14 to 2018-19 years of income, an amount that would otherwise be paid as medical expenses is treated as not being paid as medical expenses unless the payment relates to an aid for a person with a disability (paragraph 159(1B)(a) of the ITAA 1936).

Taxation Ruling TR 93/34 Income tax: medical expense rebate - meaning of medical or surgical appliance explains that hearing aids qualify as a medical or surgical appliance for the purposes of the medical expenses tax offset.

Hearing aid insurance, consumable parts and maintenance and repair costs of eligible appliances also quality as eligible medical expenses but not the cost of travel involved in getting the repairs done or in having the appliance fitted.

In your case, you have out-of-pocket expenses in relation to the purchase of your hearing aids and related expenses. The hearing aids and associated costs are considered to be an eligible medical expense for the purposes of the medical expense tax offset.

Accordingly, you are entitled to include your out-of-pocket costs in your calculation of the medical expenses tax offset.