Edited version of private advice

Authorisation Number: 1051963490470

Date of advice: 14 April 2022

Ruling

Subject: Income tax - medical expenses

Question 1

Can you claim a partial deduction for the expenditure you incurred in necessary travel to attend the medical appointments to obtain a medical certificate to the extent you were not reimbursed?

Answer

Yes.

Question 2

Can you claim a deduction under the cents per kilometre method where your travel exceeded the maximum of 5,000 kilometres?

Answer

No.

Question 3

Can you claim a deduction for medical treatments?

Answer

No.

Question 4

Can you claim a deduction for the xxxx?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You suffered a work-related injury in 20XX.

You underwent a medical procedure in 20XX.

You suffered another work-related injury in 20XX and were certified unfit for work.

Your employment ended and you have not returned to the work force.

You receive regular ongoing medical treatment through your general practitioner (GP), treating specialists and other doctors when required.

You have incurred travel expenses when you attend appointments for medical treatments.

You are required to provide a medical certificate at three monthly intervals to the paying authority, as a condition of receiving continued weekly support payments.

You travel approximately X kilometres from your home to your GP to obtain the required medical certificate.

You use the cents per kilometre method, and you keep travel expense records.

You do not use the logbook method.

You are reimbursed X cents per kilometre for travel expenses to and from your medical appointments, from the paying authority.

You travelled in excess of 5,000 kilometres in the income year 20XX-XX.

In 20XX, you incurred an expense to install a xxxx so you can continue medical treatment at home because of COVID-19 and lockdown restrictions.

You are not registered for GST or have an ABN.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 Division 28

Income Tax Assessment Act 1997 Subdivision 900-C

Reasons for decision

Travel and car expenses - medical certificates

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.

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). These principles have been affirmed by the High Court in Commissioner of Taxation v Payne [2001] HCA 3; 46 ATR 228; 201 ATC 4027.

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.

Division 28 of the ITAA 1997 specifically deals with deductions for car expenses. In order to be eligible to claim a deduction for car expenses, Division 28 requires that there be 'business kilometres'.

Subsection 28-25 of the ITAA 1997 discusses how to calculate the deduction when using the 'cents per kilometre' method and the business kilometres the car travelled is in the course of producing assessable income. You can use this formula for the first 5,000 business kilometres only. If the car travelled more than 5,000 business kilometres you must discard the kilometres in excess of 5,000.

Taxation ruling (TR) 2020/1 paragraph 7 states that if an employee can deduct a work expense under section 8-1 to the extent that it is incurred in gaining or producing assessable income (the positive test) and also meets the negative tests; and the deductions tests under section 8-1 are met, the work expense can be deducted if the substantiation requirements of Division 900 of the ITAA 1997 are satisfied.

Where the expense is both work-related and private in nature, you can only claim a deduction for the work-related portion. If the work-related expense has been partially reimbursed to you, you may need to apportion the cost of the travel.

Under the cents per kilometre method as described on the ATO website at quick code (QC) 31951 the single rate for the 20XX-XX income year is at a rate of X cents per kilometre.

In your case, your circumstances can be likened to the Anstis case, in that you are required to fulfil certain requirements to continue to be eligible to receive weekly supporting payments, namely obtaining periodic medical certificates from a medical practitioner. As such, it can be said that the travel expenses for the medical certificates are expenses incurred to establish and retain your income supporting payments.

You travel approximately X kilometres to obtain these medical certificates from your medical practitioner. The paying authority reimburses you X cents per kilometre for reasonable travel when going to medical appointments. You travelled more than 5,000 business kilometres in the income year 20XX-XX.

Where you have travelled in excess of 5,000 business kilometres in any income year and you use the cents per kilometre, you must discard the kilometres in excess of 5,000. You do not use the logbook method. Therefore, any kilometres in excess of 5,000 is not allowed.

Therefore, you are only entitled to a partial deduction to the extent you have not been reimbursed for the travel expenses you incurred for the necessary travel to attend these appointments to obtain that medical certificate under section 8-1, in order to continue to receive these payments. Accordingly, you will need to apportion the cost of travel applying the single rate for the 20XX-XX income year less the portion you are reimbursed for. You provided written evidence of the travel expense incurred as required by Division 900.

Travel and car expenses - medical treatments

Similarly as stated above, if a person incurs an expense for medical treatment and the necessary connection between the outgoing and the earning of assessable income does not exist, then the expense will not qualify for a deduction under section 8-1. The expense is generally private and domestic in nature and not an allowable deduction.

If you undertake the travel to receive medical treatment, then the cost of that travel is considered private and domestic in nature and not an allowable deduction.

As highlighted in the Rossitto case, the cost of travel to receive medical treatment is considered private in nature and is not deductible.

Accordingly, in your case you are not entitled to a deduction for any travel incurred to go to your medical appointments for treatment, as the cost of the travel is considered private and domestic in nature and any kilometres you travelled is not an allowable deduction under section 8-1.

Other deductions - xxxx

Taxation Ruling IT 2217(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. IT 2217 describes a medical appliance to be, as an example wheelchairs, hearing aids, spectacles, artificial limbs, and similar appliances.

A xxxx is generally a structure intended for recreational and leisure use.

In your case, the necessary connection between the outgoing and the earning of assessable income does not exist, and the expense will not qualify for a deduction under section 8-1. The expense is considered private and domestic in nature and is not an allowable deduction.

Therefore, you cannot claim a deduction under section 8-1 for the installation of the xxxx.

In summary

The Commissioner has considered your facts and circumstances, and, in your case, you are only entitled to a partial deduction to the extent you have not been reimbursed for the travel expense you incurred where you travelled to obtain a medical certificate in order to continue to receive the support payment from the paying authority.

Therefore, you entitled to a partial deduction under section 8-1 and will need to apportion your travel kilometres accordingly.