Edited version of your written advice

Authorisation Number: 1012875207762

Date of advice: 9 September 2015

Ruling

Subject: Medical expenses

Question

Is a deduction allowed for the cost of hearing aids?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2016

The scheme commenced on

1 July 2015

Relevant facts

A director of Company A has significantly degraded hearing which is having an increasing negative impact on their ability to do their job.

The director is finding it increasingly difficult to continue work without the assistance of hearing aids which specifically address the hearing issues.

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 or are necessarily incurred in carrying on a business for the purpose of 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, or a provision of the ITAA 1997 prevents it.

The courts have considered the meaning of 'incurred in gaining or producing the assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.'

The expenditure must therefore be related to the production of assessable income.

Generally medical expenses have no direct connection to the gaining or producing of assessable income. The expense relates to a personal medical condition and is private in nature. There is insufficient connection to the gaining or production of assessable income for a deduction to be allowed.

Taxation Ruling IT 2217 Income tax deductions: medical appliances, discusses income tax deductions in respect of medical appliances and various case decisions in relation to medical expenses. In Case Ql7 83 ATC 62, a farmer was denied the cost of a hearing aid which he claimed was an essential tool in carrying on his business. The Board found that the sole purpose of the hearing aid was to aid the taxpayer in overcoming his personal disability in order that he could earn his assessable income. The Board concluded that, 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, but rather was incurred to help overcome an unfortunate disability suffered by the taxpayer.

In this case, the director of Company A has deteriorated hearing and is currently trialling hearing aids and has benefited from using the devices.

It is acknowledged that the hearing aids help the director hear conversations in the work place and without them a number of activities must be avoided. However, the expense is not considered to be incurred in gaining the assessable income of Company A, but rather incurred in overcoming a medical condition of the director. Therefore, Company A cannot claim a deduction for the cost of hearing aids.