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Ruling

Subject: Medical expenses and deductions

Question 1

Does the cost of psychologist sessions undertaken after the completion of the referral under a Care Plan qualify as a medical expense for the purposes of calculating a medical expenses tax offset?

Answer

No.

Question 2

Are you entitled to a deduction for stress management and assertiveness training?

Answer

No.

Question 3

Does the cost of stress management and assertiveness training qualify as a medical expense for the purposes of calculating a medical expenses tax offset?

Answer

No.

Question 4

Does the cost of medications purchased from the doctor's clinic or from a chemist qualify as a medical expense for the purposes of calculating a medical expenses tax offset?

Answer

Yes.

Question 5

Are you entitled to a deduction for the cost of resume photos?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

1 July 2008

Relevant facts

You are a health care professional.

You were referred by a doctor to a psychologist for a specific number of sessions under a Care Plan?

After the sessions were completed, you continued to undertake more sessions with the psychologist. These sessions were not covered by Medicare and were not part of the Care Plan referral.

You undertook stress management and assertiveness training.

Your doctor has prescribed medications which you purchase from the doctor's clinic and chemist.

You have been told that you are required to get a letter from your doctor to be able to claim for your medications.

You have incurred costs for resume photos.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159P(3A)

Income Tax Assessment Act 1936 Subsection 159P(4)

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Subsection 159P(3A) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a tax offset is allowable to a taxpayer whose net medical expenses in the year of income exceed the relevant threshold. The amount of the rebate is 20% of the excess over the threshold.

The expenses must be paid by a resident taxpayer in respect of themselves or a resident dependant as defined in subsection 159P(4) of the ITAA 1936.

Psychologist sessions undertaken after the completion of the referral under a Care Plan

Medical expenses are defined in subsection 159P(4) of the ITAA 1936 to include payment to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation (paragraph (a)). Paragraph (d) also includes payments for therapeutic treatment administered by direction of a legally qualified medical practitioner.

Fees paid to a psychologist do not satisfy the meaning of the term medical expenses as defined under paragraph (a) because a psychologist is not a legally qualified medical practitioner.

However, the fees paid to a psychologist may satisfy the meaning of the term medical expenses as defined under paragraph (d) of the definition if the treatment is considered to be therapeutic and is administered at the direction of a legally qualified medical practitioner.

Therapy is generally the treatment of a physical or mental disorder other than by surgery.

However, according to Case A53 69 ATC 313, a mere suggestion or recommendation by a doctor to his patient that the patient undergo therapeutic treatment is not enough for the associated expenses to qualify as medical expenses. The patient would have to be referred to a particular person for specific treatment.

In your case, you were referred to a specific person for consultation for a set amount of sessions. However, you have continued to undergo counselling with the psychologist. You were not directed by a medical practitioner to undergo this therapy rather you continued the sessions after the referred amount of sessions.

Consequently, as you were not referred by a medical practitioner to a particular person for specific treatment, the therapist fees you have incurred do not qualify as medical expenses for the purposes of the medical expenses tax offset.

Stress management and assertiveness training

Deduction

Section 8-1 of the ITAA 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.

The Commissioner's view with regard to the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9. At paragraph 42 the ruling 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. The cost of self-improvement or personal development courses is generally not allowable.

In Case U101 87 ATC 616 and Naglost v. FC of T (2001) 2002 ATC 2008; (2001) 49 ATR 1028, the Administrative Appeals Tribunal (AAT) considered the deductibility of expenditure on personal development courses. Case U101 concerned a taxpayer who was employed as a Tax Office inspector. He undertook a course on communication, clear self-expression and work organisation. The course was not formally recommended or encouraged by his employer but the taxpayer considered it would assist him to carry out his work more efficiently.

The AAT denied the claim and held that there was not a sufficient nexus between the expenditure in pursuing the course and the taxpayer's employment.

In your case, the cost of stress management and assertiveness training may be of benefit to you in respect of your personal wellbeing. However, the expenses are not incurred in actually doing your duties as a health care professional. As such, the relevant nexus is not present and you are not entitled to a deduction.

Medical expense

Your stress management and assertiveness training was not therapeutic treatment administered by direction of a legally qualified medical practitioner. Rather, you found the person in the phone book.  

Therefore, the expense does not qualify as a medical expense and cannot be included in a claim for a medical expenses tax offset.

Medications purchased from doctor's clinic and chemist

As you have purchased the medications from the doctor's clinic and chemist, they meet the definition of a medical expense and can be included in a calculation for a medical expenses tax offset.

Resume photos

To be allowable under section 8-1 of the ITAA 1997, the expenditure must be able to be characterised as having been incurred in gaining or producing assessable income.

In FC of T v. Maddalena 71 ATC 4161; 2 ATR 541, Barwick CJ stated (ATC at 4162; ATR at 548):

'The costs to an employee of obtaining his employment does not form an outgoing in the course of earning the wages payable in the employment.'

Resume photos do not have a relevant connection to your current income. The resume assists you to gain new employment. Thus, the cost of the photos was not incurred in earning your income but was incurred to earn the income from a new job. Such expenses are regarded as incurred at a point too soon to be regarded as incurred in gaining or producing the assessable income.

Consequently, you are not allowed deduction for resume photos.