Private ruling: Medical expenses tax offset
Published: October 2011
Ruling period: Year ended 30 June 2011 | Year ending 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Can the costs of a clinical psychologist be included as a medical expense in the calculation of a medical expenses tax offset? | A1: Yes | Q2: Can the costs of a counsellor be included as a medical expense in the calculation of a medical expenses tax offset? | A2: No.

Relevant facts and circumstances: You have been diagnosed with a medical condition. You are being treated for your condition by your legally qualified doctor, a clinical psychologist and counsellor. Your doctor has referred you to the clinical psychologist. Your doctor has not referred you to a specific counsellor but has provided a suggested a list of names of counsellors who would be of benefit for your condition. Costs for the psychologist are partly refunded by Medicare but no costs are refunded for the counselling. Your psychologist provides written reports to your doctor who also monitors your progress. You continue to see your psychologist weekly but the counselling has ceased.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 159P(1) | Income Tax Assessment Act 1936 Subsection 159P(4)

Reasons for decision: Summary: The costs associated with your clinical psychologist are allowable medical expenses for the purposes of the medical expenses tax offset. However, the costs associated with the counselling do not qualify as medical expenses and cannot be included in your net medical expenses for the purposes of the medical expenses tax offset. | Detailed Reasoning - Detailed reasoning: A medical expenses tax offset is available to a taxpayer under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936), where the taxpayer pays medical expenses in an income year for themselves or a dependant who is an Australian resident, to the extent that they are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund. Medical expenses are defined in subsection 159P(4) of the ITAA 1936. Paragraph (d) of the definition of medical expenses includes payments for therapeutic treatment administered by direction of a legally qualified medical practitioner. Therapeutic treatment not formally prescribed by a doctor but rather undertaken on the basis of a mere suggestion or recommendation by a doctor to the patient is not enough for the treatment to qualify. The patient must be referred to a particular person for a specific treatment ( Case A53 69 ATC 313, 15 CTBR (NS) Case 30). In Case R95 84 ATC 633; 27 CTBR (NS) Case 148, the Administrative Appeals Tribunal found that therapeutic treatment necessitated the exercise of professional skill in the medical field. This would normally involve the person administering the treatment using chemical agents or drugs or some physical and mental process which are directed towards the cure or management of a disease or aliment. Therefore, therapeutic treatment is concerned with healing or curing, rather than preventing the need for therapy. Clinical Psychologist In your case, you were referred by a legally qualified medical practitioner to the clinical psychologist to treat your medical condition. Your psychologist provides written reports to your doctor who monitors your condition. As such we accept that the treatment of your condition by the clinical psychologist is under the direction of a legally qualified medical practitioner for the purposes of paragraph (d) of the definition of medical expenses. Counsellor In you case, your doctor advised you to go and see a counsellor. Your doctor did not give you a referral to a particular counsellor, and did not oversee the treatment given to you by the counsellor. Therefore, the cost paid to your counsellor cannot be included as a medical expense in calculating the medical expenses tax offset.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.