Private ruling: Work-related expenses and medical expenses
Date of advice: 23 March 2018
Published: June 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Question (1) | Are you entitled to claim a tax deduction for the cost of your medical treatment as a work-related expense? | Answer (1) | No | Question (2) | Are the costs of your treatment medical expenses for the purpose of the net medical expense tax offset? | Answer (2) | No

Relevant facts and circumstances: You suffered from chronic problems on two of your limbs prior to your medical treatment. Your injuries impacted your ability to work, which requires you to stand on your feet for significant periods of time. Replacement surgery was offered to you as a medical option to help remedy the injuries. Rehabilitation from replacement surgery would have forced you to take a long period of absence from your work. You instead opted for your alternative medical treatment. The treatment has so far allowed you to perform your job duties without having to take time off work. Your treatment is not covered by Medicare or private health insurance.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 159P | Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Detailed Reasoning - Work-related expenses: Section 8-1 of the Income Tax Assessment Act 1997 states that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income. You cannot claim a deduction if the loss or outgoing is of a capital, private or domestic nature. 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. 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 as the expenditure is too remote. In your case, it is acknowledged that you opted to have medical treatment in order to help you perform your work duties. However, there is insufficient connection to the gaining or production of assessable income for a deduction to be allowed. You are therefore not entitled to claim a tax deduction for the cost of your medical treatment as a work-related expense. | Detailed Reasoning - Medical expenses: A medical expenses tax offset is available under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) where you pay certain medical expenses in an income year for yourself or a dependant who is an Australian resident, to the extent that you are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund. Under changes to the legislation, the net medical expenses tax offset is being phased out. Many items and services that may previously have been considered eligible medical expenses are no longer allowable. The Tax and Superannuation Laws Amendment (2014 Measures No.1) Act 2014 amended section 159P of the ITAA 1936 to phase out the ‘Net Medical Expense Tax Offset’. Subsection 159P(1B) of the ITAA 1936 was inserted as a result of the amendment. Subsection 159P(1B) states: 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: (a) relates to an aid for a person with a disability; or (b) relates to services rendered by a person as an attendant of a person with a disability; or (c) relates to care provided by an approved provider (within the meaning of the Aged Care Act 1997) of a person who: (i) is approved as a care recipient under that Act; or (ii) is a continuing care recipient within the meaning of that Act. In your case, the amount you paid for the medical treatment of your limbs does not satisfy any of the provisions listed in Subsection 159P(1B) of the ITAA 1936. You are therefore not entitled to claim the cost of your medical treatment under the net medical expenses tax offset.