Private ruling: Medical and travel expenses
Date of advice: 28 November 2017
Published: April 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2016 | Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for doctor’s fees, ancillary health, pharmacy and travel expenses incurred during treatment and attending medical practitioners for treatment as required by the insurance company paying you the assessable income protection payments? | A1: No. | Q2: Are you entitled to a deduction for travel expenses incurred to go to your medical practitioner solely to obtain a medical report? | A2: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1. Detailed reasoning | 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. | A number of significant court decisions have determined that for an expense to be an allowable deduction: | ● it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; (1958) 100 CLR 478 ( Lunney’s case )), | ● 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), and | ● it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). | Generally medical expenses have no direct connection to the gaining or producing of assessable income and a deduction is not allowable. Medical expenses are usually a prerequisite to the earning of assessable income and relate to a personal medical condition and are private in nature. | 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. | Your case can be likened to the Anstis case , in that you are required to fulfil certain requirements to continue to be eligible to receive assessable income protection payments, namely obtain periodic reports from a medical practitioner. As such, it can be said that the expenses for the report are expenses incurred to establish and retain your income protection payments. Therefore you are entitled to a deduction for the fee paid to your medical practitioner to receive the required medical report. | However, travel to the place of study was not specifically considered in the Anstis case and if it were, the issue of whether or not the travel could be considered to be private in nature would need to have been addressed to determine its deductibility. | The Commissioner's view, as stated in Taxation Ruling IT 2199, is that the expenses incurred in travelling from home to work are not deductible as they are outgoings of a private nature. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. Such expenses are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction. | Travel undertaken to receive medical treatment for a work-related injury was discussed in Rossitto v. FC of T 98 ATC 2093 ( Rossitto ). In this case, the taxpayer severely damaged his knee in a work-related injury and liability was accepted for compensation. The taxpayer argued that the cost of regular travel by motor vehicle to his doctor, physiotherapy treatment and specialist doctors was necessarily incurred in deriving the compensation income. He further argued that the payment of compensation was conditional on the maintenance of a rehabilitation program. However, the claim for travel costs failed as they did not have the required nexus with the derivation of assessable income and were found to be of a private or domestic nature. It was difficult to separate the private and personal nature of medical treatment and its relationship with the derivation of income. The case concluded that, in the same way as travelling to a place of employment is not deductible, travel to receive medical treatment, even if it could be said that such medical treatment is a prerequisite to earning income is equally non-deductible. | The difficulty of separating the private nature of receiving medical treatment from the relationship attending the medical practitioner has to the derivation of assessable income is arguably not present if the visit does not involve the receipt of any actual treatment. Should the purpose of the trip be solely to attend appointments, as required by the payer of your income protection payments, then arguably this is not private in nature and that travel would be deductible. | In your case, you are required to attend medical and ancillary health appointments and comply with the treatment plans prescribed by any treating medical physician. | You are also required to provide periodic medical and personal statements attesting to your physical and mental condition as a condition to receiving ongoing income payments. | If you undertake the travel solely to acquire a medical report from your medical practitioner, as required by the insurance company, (that is, no actual medical treatment is received) then the cost of that travel is considered to be deductible against the assessable income protection payments you receive. | However, as highlighted in the Rossitto case, the cost of travel to receive medical treatment is considered private in nature and not deductible. Accordingly, you are not entitled to a deduction for any travel incurred to go to your medical practitioner for treatment. | Please note that you may need to apportion your travel expenses as the full amount you have incurred is not allowable.


Relevant facts: You are receiving assessable income protection payments. | A condition of receiving your income protection payments is that you attend medical and ancillary health appointments and comply with the treatment plans prescribed by any treating medical physician. | Your unreimbursed expenses include: | 2016/17 Year: Health fund excess on hospital admissions | Your travel costs to and from medical appointments, hospital treatment and ancillary health/counselling appointments based upon cents per kilometre and route travelled to each appointment are: | Estimate of km travelled in each year for appointments.