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Edited version of your written advice
Authorisation Number: 1013103540804
Date of advice: 7 October 2016
Ruling
Subject: Deduction for medical expense
Question
Are you entitled to claim a tax deduction for the costs associated with surgery?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 2017
The scheme commenced on:
1 July 2016
Relevant facts and circumstances
You were injured while at work.
Your work related insurance does not wish to pay for the surgery required as a result of the work incident. Your surgeon considers the surgery is necessary.
You wish to use your private health insurance to pay for the surgery, then claim the costs as a work related deduction.
You have been on work insurance benefits for over a month.
You wish to return to work as soon as possible.
Your work related insurer has been slow in paying your medical expenses.
You wish to fund your own rehabilitation and return to work sooner.
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) broadly allows a deduction for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
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 as the purpose of the expense is to return you to health.
In your case the expense relates to a personal medical condition and is private in nature. Although it is acknowledged that you needed the operation in order to continue your occupation, there is insufficient connection to the gaining or production of assessable income for a deduction to be allowed.