Private ruling: The deductibility of psychology services
Date of advice: 27 May 2016
Published: July 2016
Ruling period: Year ended 30 June 2015.
Date scheme commenced: 1 July 2014

Ruling: Q1: Are expenses relating to psychologist consultations an allowable deduction? | A1: No.

Relevant facts and circumstances: You are a teacher who works with children who have experienced trauma or stress in their life. The supervisor services, is not available through the education department. You can obtain this service privately at approximately $130 an hour.

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 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. For the expenditure to be deductible, it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T (1958) 100 CLR 478), (1958) 11 ATD 404. There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47); (1949 8 ATD 431). We requested further information on the 'supervisor services' but none has been provided. Therefore we have assumed the services are either private counselling sessions to enable you to cope with the stress and difficulties associated with working with children who have experienced trauma or stress in their life or you are receiving training to enable you to provide counselling to these children. | Detailed Reasoning - If the sessions relate to the receipt of counselling: Generally, medical expenses have no direct connection to the gaining or producing of assessable income. There is insufficient connection to the gaining or production of assessable income for a deduction to be allowed as the expenditure is too remote. In addition, medical expenses can be characterised as being of a private nature and therefore can also be excluded on that ground. The following example in Taxation Ruling TR 98/9 is also relevant: 43. Example: Brianna, a company director, was having difficulty coping with work due to stress brought about by difficulties with her family situation. She decided to attend a four-week course in stress management to help her deal with the situation. Brianna attended the course after hours and paid for it herself. The cost of the course is not allowable because the course was not designed to maintain or increase the skill or specific knowledge required in her current position. The expenses are more correctly characterised as related to a private matter. Although in your case, the need for counselling may be linked to your employment, the receipt of counselling is still considered an inherently private matter and not a deductible work related expense. | Detailed Reasoning - If the sessions relate to the receipt of training to provide counselling: TR 98/9 which considers the deductibility of self-education expenses states if a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. You are a teacher who works with children who have experienced trauma or stress in their life. The state Education Department does not provide supervisor services so you have obtained these services at your own cost. Although the children you teach have experienced trauma or stress in their life, your role is to teach your students, not to provide counselling or psychological services to them. This is made clear by the fact that your employer does not supply you with, or assist you with obtaining, counselling or psychological services training. If any of your students do require counselling or psychological services, it is expected that your employer would require you to refer them to a person specifically qualified to provide those services. Therefore, the receipt of training to provide counselling is not considered to be an expense incurred in the actual course of gaining or producing your assessable income as a teacher. | Summary: Whether the 'supervisor services' relate to the receipt of counselling or the receipt of training to provide counselling, in either case the expenditure is not considered deductible.