Private ruling: Deduction of costs incurred for medical reports
Published: March 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Are the costs incurred in obtaining medical reports in support of your entitlement to Compensation income replacement payments deductible under Section 8-1 of the Income Tax Assessment Act 1997? | A1: No This ruling applies for the following periods: Year ended 30 June 2017

Relevant facts and circumstances: You were in receipt of income replacement compensation payments. Your payments were cancelled after a review found that you were no longer suffering from your compensable condition. You incurred costs in obtaining medical reports to support your claim for income entitlement.

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 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. The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47, the High Court stated that: 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing assessable it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.' In Rossitto v FCT 39 ATR 1019, 98 ATC 2093 the taxpayer suffered an injury at work and was paid workers compensation for the difference between what they were able to earn in suitable employment and what they would have earned had he been able to continue his job as an engineer. The payment of compensation was conditional on his maintenance of a rehabilitation program. The taxpayer claimed motor vehicle expenses to see their physiotherapist and doctor, it was held that even though it was mandatory that he undertake the rehabilitation program, the medical expenses were a prerequisite of receiving compensation and not necessarily incurred in the gaining or production of his assessable income. Your case is similar to Rossittos case. The cost of doctor appointments in order to obtain medical reports is not incurred in the actions of deriving your assessable income and is private in nature. As such it is not deductible as an expense under section 8-1 of the ITAA 1997.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.