Private ruling: Medical expenses
Date of advice: 7 August 2018
Published: September 2018
Ruling period: Period ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is XXXX Pty Limited entitled to claim a deduction under section 8-1 of the Income tax Assessment Act 1997 (ITAA 1997) for bearing the cost of medical expenses for their employee’s workplace injury. | A1: Yes Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature or are necessarily incurred in gaining or producing exempt income. The employer intends on paying for an employee’s medical expenses and related health sessions for the treatment of their work related injury. Where an outgoing is voluntary, the expense must be reasonably capable of being seen as appropriate to the carrying on of the business. Although the employee is also a director of the company and will receive a personal benefit from this expenditure, the business also stands to benefit from a reduction of the ill-effects on the employee of the work-related injury. As a result, the outgoing is necessarily incurred in the carrying on of the business and is therefore deductible under section 8-1 of the ITAA 1997.

Relevant facts and circumstances: The employee xxxx is the sole director of the company. The employee suffered a workplace injury in xxxx. The nature of work entails long days and extended periods of sitting causing the employee to suffer from ongoing back and muscle pain. The employee sought medical treatment but this was not entirely successful. The employee sort non-traditional methods and found a “Movement Guidance Health Related program” provided them relief to enable them to work. The employee has been paying their own medical costs. The employee has not made a claim on the employer’s Workers Compensation Insurance and would prefer to deal with the matter internally by way of the company paying their medical and related health session expenses. The employee has provided a letter from xxxx Health Related, the letter states “xxxx has been working closely with a senior instructor working on improving motor skills including pelvis stability and helping them manage their chronic back pain.” The employee has provided a medical certificate from their doctor stating “xxxx suffers chronic back pain. They find Health Related beneficial for their pain and enables them to carry out their work..” Their doctor recommends they continue their Health Related sessions.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 Further issues for you to consider | We have limited our ruling to the questions raised in your application. There may be related issues that you should consider including: | ● The provision of a benefit to employees and any consequent implications for Fringe Benefits Tax (FBT) has not been considered as part of this ruling. A separate Ruling, relating to a specific provision within the FBT legislation, may be applied for should the Company wish to have this matter determined.