ATO Interpretative Decision

ATO ID 2002/775

Income Tax

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Issue

Is a sole trader entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997') for medical expenses incurred to vaccinate against Q fever, which is a well recognised occupational hazard in the cattle industry?

Decision

Yes. The medical expenses are necessarily incurred in carrying on a business for the purpose of gaining assessable income and are, therefore, deductible in accordance with paragraph 8-1(1)(b) of the ITAA 1997.

Facts

The taxpayer operates a business as a sole trader. As a direct consequence of carrying on that business, the taxpayer is regularly exposed to cattle that may be infected with Q fever. Q fever is a well recognised occupational hazard within the cattle industry.

As a result of the probability of coming into direct contact with potentially infected animals, the taxpayer incurred medical expenses to vaccinate against Q fever.

Reasons for Decision

Generally, a deduction is not allowable for the cost of vaccinations to protect against infectious diseases in the work place as this is a personal medical expense and, therefore, of a private nature (see Income Tax Ruling TR 95/8). However, in this particular case, the disease being vaccinated against is not one which affects the general community but is restricted to persons who come into close contact with cattle.

In Mansfield v. FC of T 96 ATC 4001; (1995) 31 ATR 367 the Federal Court of Australia decided that expenses of a private or personal nature may be an allowable deduction where the working environment is sufficiently abnormal and unique as to make the essential character of the expenditure work-related rather than private in nature. However, whether such an expense is either private or work related involves questions of fact and degree, and something out of the ordinary is usually necessary for the essential character of the expenditure to be seen as work related (Taxation Ruling TR 96/17).

In this particular case, it is considered that exposure to Q fever is an incident of working within the cattle industry rather than a more general risk to the public. Therefore, any medical expenses incurred to vaccinate against the risk of contracting Q fever by a sole trader, who carries on a business which involves direct contact with cattle, are regarded as arising from the carrying on of that business. Consequently, the medical expenses are of a business nature and an allowable deduction in accordance with paragraph 8-1(1)(b) of the ITAA 1997.

Year of income:  Year ending 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   section 8-1
   Paragraph 8-1(1)(b)

Case References:
Mansfield v. FC of T
   96 ATC 4001
   31 ATR 367

Related Public Rulings (including Determinations)
Taxation Ruling TR 95/8
Taxation Ruling TR 96/17

Related ATO Interpretative Decisions
ATO ID 2002/776

Keywords
Deductions & expenses
Medical expenses
Occupational health & safety expenses
Sole traders

Siebel/TDMS Reference Number:  CRS77780

Business Line:  Small Business/Individual Taxpayers

Date of publication:  31 July 2002

ISSN: 1445-2782