Private ruling: Surgery costs as income deduction or medical offset
Date of advice: 19 June 2017
Published: October 2017
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Can you claim the cost of your surgery as a deduction under s8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Can you claim the cost of your surgery as an offset under the Net Medical Expense Tax Offset under Subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A2: No.

Relevant facts and circumstances: You are employed in a position where you are required to maintain a driver’s license, a senior first aid certificate and weapons qualifications to facilitate your duties and employment. You have developed severe visual impairment. Eyewear cannot solve your vision impairment and you have scheduled surgery. Your private health care will not cover the full cost of the surgery and associated costs.

Relevant legislative provisions: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) | Subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936)

Reasons for decision: Summary: 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, or relate to the earning of exempt income. Medical expenses have no direct connection to the gaining or producing of assessable income. The purpose of the expense is to return you to health; it is in essence overcoming a medical condition and not directly related to the production of your income earning activities. Taxation Ruling IT 2217 Income tax deductions: medical appliances, discusses income tax deductions in respect of medical appliances and various case decisions in relation to medical expenses. In Case Ql7 83 ATC 62, a farmer was denied the cost of a hearing aid which he claimed was an essential tool in carrying on his business. The Board found that the sole purpose of the hearing aid was to aid the taxpayer in overcoming his personal condition in order that he could earn his assessable income. The Board concluded that, although the taxpayer might be unable to earn his assessable income without the aid of the relevant appliance, the outlay on the appliance was not incurred in gaining assessable income or carrying on a business for that purpose, but rather was incurred to help overcome an unfortunate condition suffered by the taxpayer. Furthermore the outlay was private in nature. Although your circumstances are not the same as those above, the principles are relevant. In your case you intend to incur expenses for surgery. It is considered that even though the expenditure had a causal connection with the earning of income, the expenditure is inherently of a private or domestic nature and not incurred in gaining or producing your assessable income. They are considered to be private in nature and therefore no deduction is allowable under section 8-1 of the ITAA 1997. The net medical expenses tax offset is being phased out. From 2015–16 until 2018–19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care. As such you can only claim this offset if you had expenses that relate to disability aids, attendant care or aged care. In your case you intend to incur expenses for surgery. Based on your circumstances paragraph 159P(1B)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) would be the only provision where your expenses can be considered. This paragraph states that 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 relates to an aid for a person with a disability. Disability aids are items of property manufactured as, distributed as, or generally recognised to be, an aid to the function or capacity of a person with a disability but, generally will not include ordinary household or commercial appliances. Examples include wheelchairs, walking frames, hearing aids, car controls for the disabled and similar appliances. These examples are items of property that are manufactured as, distributed as and generally recognised to be an aid to the function or capacity. Anyone with a disability can go to a supplier and purchase these types of items. However, when it comes to artificial devices or appliances used in operations, these items cannot be purchased by a patient on their own, nor can they be sold by that person. They are an item that is supplied by the legally qualified medical practitioner as part of the operation. In your case, you will incur costs in relation to a procedure to restore and preserve your functional vision. Your diagnosed condition and subsequent restoration procedure is not considered to be a disability aid for the purposes of the medical expense tax offset. Accordingly, you are not able to include the costs for your eye procedures in calculating a medical expense tax offset.