Private ruling: Deduction for travel expenses
Published: June 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for the cost of travelling to visit medical specialists and doctors for treatment for your work injury? | A1: No.

Relevant facts and circumstances: You are in receipt of accident insurance payments following your injury. You are required to travel for medical treatment and to be medically assessed. You receive payments towards the cost of some of your trips from your insurer and some trips are paid by yourself.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: In order for an expense to qualify for deduction under section 8-1 Income Tax Assessment Act 1997 (ITAA 1997), it must have been directly incurred in the course of gaining or producing your assessable income, and must not be of a capital, private or domestic nature. In Rossitto v FC of T 98 ATC 2093; 39 ATR 1019 the cost of travelling to obtain medical treatment for a work-related injury was held not to be deductible even though such treatment was a prerequisite to the earning of assessable compensation payments because there was insufficient nexus between the incurring of the expenses and the derivation of assessable income. Workers compensation is generally paid in order to cover a period of incapacity to work. While there may be an ongoing requirement to fulfil certain responsibilities in order to continue receiving that income, the fulfilment of those responsibilities does not constitute activities which derive or gain the income. These activities remain merely incidental to the end. You incur travelling expenses as a result of the need to attend meetings with doctors and specialists in order that you continue receiving your accident insurance payments. However, it is considered that you do not derive assessable income because you attend such meetings. Rather, your accident insurance income is derived because you are currently incapable of working. Attending doctors' meeting, in itself, does not earn you the income. Rather, this attendance can more properly be characterised as a prerequisite to the earning. It is a long standing principle that a taxpayer does not satisfy section 8-1 of the ITAA 1997 merely by demonstrating a casual connection between the expenditure and the derivation of income. What must be shown is a closer and more immediate connection. The expenditure must be incurred in gaining or producing your assessable income ( Lunney v Commissioner of Taxation (1958) 100 CLR 478). These principles have been affirmed by the High Court in Commissioner of Taxation v Payne HCA 3. In applying the above law and principles to your situation, the travel expenses you incur to attend medical meetings are not incurred in gaining or producing your assessable income, as the travel you undertake is a pre-requisite to the earning of your assessable compensation payments. Your travel expenses are of a private nature and are not an allowable deduction.