Private ruling: Deduction for medical aids
Published: April 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for any part of the cost of medical aids? | A1: No.


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 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. In Ronbipon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] ALR 875; (1949) 23 ALJ 139, the High Court of Australia stated that in order for expenses to be allowable as deductions, the expenses must be incidental and relevant to the gaining of the assessable income. Whether this connection exists is a question of fact to be determined by reference to all the facts of the particular case. In Case Q17 83 ATC 62; Case 82 26 CTBR (NS) 556, the taxpayer was a primary producer who had purchased a medical aid so that his business associates could communicate with him in the day to day running of the business. The taxpayer argued that the medical aid was an essential tool to enable him to carry on his business. The Board of Review disallowed the deduction. It was held that despite the connection between the outlay of the taxpayer and the taxpayer's income, the outlay was not necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. The primary cause of the expenditure was for the correction of a disadvantage that was personal to the taxpayer. The expense was therefore of a private nature. In Case V9 88 ATC 149, the chairman of a committee of inquiry sought a deduction for the cost of a medical aid he purchased to help him cope with the public hearings of the inquiry. The taxpayer argued that the medical aid was essential for the particular type of work he undertook, and that while the medical aid was useful at large gatherings, he did not use it for normal conversation in his private life. The Administrative Appeals Tribunal disallowed the claim. It was held that although the medical aid was mainly used during employment, the need for it arose because of a personal disability of the applicant. The expense was therefore private in nature and consequently non-deductible. Taxation Ruling IT 2217 provides further guidance regarding the extent to which taxpayers suffering from physical disabilities are entitled to income tax deductions for expenditure on medical appliances such as medical aids, used by them in the course of gaining or producing assessable income. Paragraph 7 of IT 2217 states that the principles emerging from the various decisions apply to similar situations where taxpayers are required to use some type of medical device or surgical appliance to overcome a physical disability. Accordingly, claims for income tax deductions in respect of expenses incurred on medical appliances, for example, wheelchairs, medical aids, spectacles, artificial limbs and similar appliances used by persons in carrying out their duties of an employment are not allowable. These classes of expenditure would normally qualify as medical expenses for tax offset purposes. In your case, you have suffered from a medical condition since childhood and require a medical appliance to restore the relevant function. In light of the principles outlined above, the costs of the medical appliance are private in nature. The expenses are not considered to be incurred in gaining your assessable income, but rather incurred in overcoming a medical condition. Therefore, you are not entitled to claim a deduction for any part of the cost of the medical appliance.

Relevant facts: You have had a medical condition since childhood. | You need to have a medical appliance to be able to do your job. | You wish to claim 50% of the cost of the medical aids as a deduction.