A recent Administrative Review Tribunal (ARTA) decision has reaffirmed the long-standing principle that medical expenses are not tax-deductible under Australian tax law — even when they relate to health conditions that end a person’s employment.
The case, Wannberg and Commissioner of Taxation (Taxation) [2025] ARTA 1561, offers a timely reminder for Sydney taxpayers and retirees about what can and cannot be claimed as a personal tax deduction.
The Case: Medical Expenses Not Deductible
In this case, the taxpayer’s only source of income was a Total and Permanent Disability (TPD) pension. The taxpayer sought a private ruling from the Australian Taxation Office (ATO), asking whether approximately $100,000 in medical treatment costs could be claimed as a tax deduction.
The taxpayer argued that the medical treatments were directly linked to their forced retirement on medical grounds, and therefore had a sufficient connection to the earning of assessable income.
However, the Tribunal rejected the claim, ruling that these expenses were private in nature and not incurred in the course of producing assessable income.
Why the Tribunal Rejected the Deduction
Under Australian tax law, to qualify as a deductible expense, there must be a clear and direct link between the expense and the income-producing activity.
The ARTA found that the taxpayer’s medical treatments were undertaken for personal health reasons, not for generating or maintaining income. Since the taxpayer was no longer employed — and the expenses related to their personal condition — the deductions did not meet the required legal test.
The decision reinforces the ATO’s consistent position:
Medical expenses, even if substantial or related to an employment-ending injury, are generally private and non-deductible.
What This Means for Australian Taxpayers
This ruling highlights a key distinction for individuals receiving disability pensions, insurance payouts, or compensation due to medical incapacity.
While these payments may be assessable or tax-exempt depending on their structure, related medical expenses do not qualify as deductions.
Sydney taxpayers — particularly retirees and individuals with medical-related employment exits — should review any expense claims carefully before lodging their tax returns to avoid unnecessary disputes or audit risks.
How BOA & Co. Chartered Accountants Can Help
At BOA & Co., we help individuals and professionals across Sydney navigate complex personal tax deduction rules and ATO compliance issues.
Our team can help you:
- Understand which personal and medical-related expenses qualify as legitimate deductions
- Manage TPD or disability pension tax implications
- Identify tax planning opportunities for medical retirement or redundancy
- Prepare compliant, evidence-based tax returns to avoid ATO challenges
With the right guidance, you can stay compliant and maximise every deduction you’re legally entitled to.
The Bottom Line
The Wannberg case confirms a simple but critical rule: medical expenses are personal, not business-related — and therefore not deductible.
If you’re unsure about whether your medical or insurance-related expenses qualify for deductions, now is the time to seek professional advice. A proactive review today can prevent costly disputes tomorrow.
📞 Need help reviewing your personal tax deductions?
Contact BOA & Co. Chartered Accountants today.
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🌐 www.boanco.com.au
📍 Sydney, NSW
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