The Administrative Review Tribunal (‘ART’) recently held that medical expenses incurred by a taxpayer to obtain (or regain) employment were not deductible as they were not incurred in gaining or producing his assessable income.
The taxpayer was an airplane pilot. In July 2021, the Civil Aviation Safety Authority advised the taxpayer of the steps that he needed to take to regain the medical certificates that were a prerequisite to him holding a licence to work as a pilot.
The taxpayer incurred expenses relating to this between July 2021 and May 2022, and he claimed a deduction for these expenses in his tax return for the 2022 income year.
The ATO disallowed these deductions, and the ART affirmed the ATO’s decision.
The ART noted that the medical expenses incurred by the taxpayer “merely put him in a position to undertake employment as a pilot, and as such are not deductible.”
That is, the expenses were not deductible because they were incurred to put the taxpayer in a position to earn income (i.e., to regain his certification), rather than in the course of earning that income, and they were therefore incurred “too soon” (despite some being incurred after his employment commenced in March 2022).
