Private ruling: Medical expenses deductibility
Published: March 2015
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2014

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

Relevant facts and circumstances: You are employed as a doctor. As you suffer from a medical disorder, as a condition of your registration with the Medical Board you are required to have ongoing consultations with a psychologist and subsequent reports submitted. You incur these expenses in order to continue to be employed in the medical field.

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). To determine deductibility it is necessary to consider the reason for which the expenses were incurred. As a condition of your registration with the medical board you are required to participate in periodical consultations with a psychologist, and submit reports for the board's consideration. In Case L26, 79 ATC 126; 23 CTBR (NS) Case 32 a teacher was denied a claim for legal expenses incurred in appealing against her dismissal from employment because she could not control classes. It was found that the outlay was a necessary step prior to gaining or producing income but it was not an outlay incurred in the course of gaining or producing such income. This reasoning may be applied in your case. That is, the expenses were incurred to keep your employment they were not incurred in the actual course of gaining or producing your assessable income. This expense is therefore of a capital nature and is not deductible. The purpose of the expenditure was to re-establish an income stream or for gaining an enduring benefit i.e. maintaining your current employment. Paragraph 43 of Taxation Ruling TR 98/9: 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 you have undertaken the counselling at the direction of the Medical Board, the counselling is not incurred in the actual course of gaining or producing your assessable income and is therefore not deductible.