Private ruling: Deductions - motor vehicle expenses - medical treatment
Published: November 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to claim a deduction for motor vehicle expenses incurred in travelling to medical treatment? | A1: No.

Relevant facts and circumstances: You were injured in the course of your employment. You have since been deemed totally and permanently incapacitated. You receive a superannuation income stream. Your medical expenses are reimbursed, however you have not claimed for the motor vehicle expenses you have incurred in travelling to your medical appointments.

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

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss or outgoing which is incurred in gaining or producing assessable income but not for a loss or outgoing which is of a capital, private or domestic nature. For an expense to be incurred in gaining or producing assessable income it must be directly relevant to the person's income earning activities and have the essential character of an income producing expense. The essential character of an expense is determined by an objective analysis of all the surrounding circumstances. To be deductible under the first limb of section 8-1 of the Act, the expenditure must be incurred in gaining or producing the assessable income, but expenditure which, is essentially of a private nature is not deductible. It is a long standing principle that a taxpayer does not satisfy section 8-1 merely by demonstrating some causal 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 the course of" gaining or producing the 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 [20001] HCA 3 . The travel expenditure you incurred in travelling to and from your medical treatment is not relevant or incidental to the earning or receipt of the superannuation income stream. Furthermore these expenses are of a private nature. You have been assessed as being totally and permanently incapacitated; hence there is no requirement for you to incur any expenditure to ensure you continue to receive your superannuation income stream. The travel expenditure is therefore not deductible.

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