Private ruling: Medical expenses deduction
Date of advice: 30 August 2017
Published: December 2017
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to claim a tax deduction for the costs associated with surgery on your eye? | A1: No.

Relevant facts and circumstances: You are employed by a public utility. You were advised that you needed an eye operation in order to obtain your heavy vehicle licence which was required for you to continue to work at your current level. You have documentation to show that your senior manager confirmed that the needed to pass the sight test in order to complete the licence upgrade. You also have a report from a medical specialist which gives the options for surgery to your eye in order to pass the sight test and attain the heavy vehicle driving qualification. You had the procedure, and paid for it in full at that time. None of the cost was reimbursed by Medicare or your private health fund.

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) broadly allows a deduction for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent 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 the assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.' In Case Q17 83 ATC 62; Case 82 26 CTBR (NS) 556, the taxpayer was a primary producer who had purchased a hearing aid so that his business associates could communicate with him in the day to day running of the business. The taxpayer argued that the hearing 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. Generally medical expenses have no direct connection to the gaining or producing of assessable income as the purpose of the expense is to return you to health. These expenses relate to a personal medical condition and are private in nature. There is generally insufficient connection to the gaining or production of assessable income for a deduction to be allowed. In your case the expense relates to a personal medical condition and correction of your sight which is private in nature. Although it is acknowledged that you needed the operation in order to continue your occupation, there is insufficient connection to the gaining or production of assessable income for a deduction to be allowed.