Private ruling: work related expenses - medical
Published: April 2012
Ruling period: n Year ending 30 June 2012 | n Year ending 30 June 2013 | n Year ending 30 June 2014 | n Year ending 30 June 2015 | n Year ending 30 June 2016
Date scheme commenced: 12 March 2012

Ruling: A1: No | Q1: Do the costs of a commercial steam cleaner, clothes drier and pest inspections qualify as eligible medical expenses for medical expenses tax offset purposes? | A2: No | Q2: Do the costs of specialist appointments and prescriptions qualify as eligible medical expenses for medical expenses tax offset purposes? | A3: Yes

Relevant facts and circumstances: Whilst away with work you sleep in motels. Recently when returning home from a work trip you noticed that you had a rash, which appeared to have been caused by bed bugs. To reduce the risk of infestation of bed bugs into your home and vehicles, you had them examined by a pest inspector. In addition you acquired a clothes drier and a commercial steam cleaner, as these items have been proven to be an effective tool against bed bugs. You have seen a Doctor in regards to the rash and were referred onto a specialist. You were prescribed medications and creams, as treatment for your rash, by a Doctor.

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

Reasons for decision: Detailed Reasoning - Deduction: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss or outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature, or relates to the earning of exempt income. There must be sufficient connection between the outgoing and the activities directed at gaining or producing assessable income. The decision in Ronpibon Tin v. FCT (1949) 78 CLR 47; (1949) 8 ATD 431, confirms that for an outgoing to be deductible under section 8-1 of the ITAA 1997, a taxpayer has to establish that there is a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income. In your case whilst returning home from a work trip you noticed that you had a rash, which appeared to have been caused by bed bugs. As a result of treating your rash and protecting your home from the infestation of bed bugs you have incurred expenses for the cost of a commercial steam cleaner, clothes drier, pest inspections, specialist appointments and prescriptions. Although these costs have arisen from the incident you had whilst away with work, the costs were not incurred in gaining or producing your assessable. These expenses are considered to be of a private nature as they relate to your personal health. Therefore, you are not entitled to a deduction for them under section 8-1 of the ITAA 1997. | Detailed Reasoning - Medical expenses tax offset: Under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) a tax offset is available to a resident taxpayer whose net medical expenses paid in the year of income exceed the relevant threshold. Net medical expenses are the medical expenses a taxpayer has paid less any refunds they received, or could have received, from Medicare or a private health fund. The medical expenses tax offset is 20% of the amount by which the net medical expenses exceed $2,000 for the 2011-12 financial year. Please note that the threshold amount may change in future financial years. Payments in respect of medical equipment Medical expenses are defined in subsection 159P(4) of the ITAA 1936. Paragraph (f) of the definition includes payments in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner. Taxation Ruling TR 93/34 explains the meaning of a 'medical or surgical appliance' as being an instrument, apparatus or device which is manufactured, distributed or generally recognised as an aid to the function or capacity of a person with a disability or an illness. Taxation Ruling TR 93/34 also provides that generally a household or commercial appliance is not a 'medical or surgical appliance' and that we need to look at the character of the appliance, not the purpose for which it is prescribed or used. In your case you have incurred expenses in relation to purchasing a commercial steam cleaner and clothes drier. Although you have purchased these items to reduce the risk of infestation of bed bugs into your home they have not been manufactured, distributed or generally recognised as an aid to the function or capacity of a person with a disability or an illness. These items are considered to be general household or commercial appliances. Therefore the cost of the commercial steam cleaner and clothes drier are not eligible medical expenses under subsection 159(P) of the ITAA 1936. Payments in respect of illness Paragraph (a) of the definition of 'medical expenses' in subsection 159P(4) of the ITAA 1936 includes payments made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation. The term 'illness' is not defined in the ITAA 1936 and therefore it is necessary to look at the ordinary meaning of the term. An illness includes a sickness, disease, or disorder of the body or the mind and involves a deviation from the normal healthy state. In your case you have incurred expenses in relation to protecting your home from bed bugs and also for the treatment of your rash. These expenses included the cost of pest inspections, specialist appointments and prescriptions. Although the pest inspections were carried out to prevent the infestation of bed bugs into your home, payment of these costs were not made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation. As such the cost of the pest inspections are not eligible medical expenses under subsection 159(P) of the ITAA 1936. However, it is accepted that the costs of your specialist appointments and prescriptions satisfy the requirements of subsection 159P(4) of the ITAA 1936. Therefore these costs can be included as eligible medical expenses for the 2011-12 financial year.

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