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Ruling
Subject: work related expenses - therapy sessions
Question
Are you entitled to claim a deduction for consultations in the relevant financial year?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You are employed as a counsellor.
You attend regular consultations with another qualified specialist.
You believe the sessions are linked to your income as it assists your professional and work development, particularly in terms of the client relationship.
The consultations will form part of your professional development throughout your career.
You have provided a schedule showing you frequently attended sessions over the course of the financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Expenditure on self-education falls for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). To be deductible, expenditure must have been incurred in gaining or producing assessable income and is not of a capital, private or domestic nature.
The general principles of deductibility have been established in a number of cases. The High Court of Australia has indicated that the expenditure must have the essential character of an outgoing incurred in gaining assessable income (Lunney v FCT; Hayley v FCT (1958) 100 CLR 478). 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 FCT (1949) 78 CLR 47).
Taxation Ruling TR 98/9 outlines the circumstances in which self-education expenses are deductible under section 8-1:
1. Where they have a relevant connection to the taxpayer's current income-earning activities.
2. If a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge.
3. If the study of a subject of self-education objectively leads to or is likely to lead to, an increase in a taxpayer's income from his or her current income-earning activities in the future.
4. No deduction is allowable for self-education expenses if the study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.
In determining whether the cost of consultations incurred whilst you are employed is deductible, a relevant connection between your income-earning activities as a counsellor and the therapy sessions must be established.
Taxation Ruling TR 98/9 states that 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, although a deduction may be allowed in certain circumstances.
While we accept that the sessions will form part of your professional development, it is considered that the sessions support your wellbeing rather than providing you with skills or knowledge to perform your employment duties. This is supported by the quantity and regularity of the sessions, which also indicates they are private in nature. Further, they are considered to be too general in relation to your current employment. As such, the cost of sessions is not deductible.