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Edited version of your private ruling
Authorisation Number: 1012584618580
Ruling
Subject: Work related expenses
Question
Are you entitled to a deduction for your therapy fees as a work related expense?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2003
Year ended 30 June 2004
Year ended 30 June 2005
Year ended 30 June 2006
Year ended 30 June 2007
Year ended 30 June 2008
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commences on:
1 July 2002
Relevant facts and circumstances
You paid substantial fees for intensive help to enable you to recover from personal difficulties.
The therapy prevented you from being incapacitated and unable to work.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (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 courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that:
For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.
In your case, you received therapy to enable you to recover from personal difficulties.
Whilst we accept that without the therapy you may not have been able to continue working, medical expenses have no direct connection to the gaining or producing of assessable income.
The purpose of this expense is to allow you to return to good health. Accordingly, there is an insufficient connection to the gaining or production of assessable income for a deduction to be allowed. In addition, medical expenses can be characterised as being of a private nature and therefore can also be excluded on that ground.
Therefore you cannot claim a deduction for the therapy expenses as a work related deduction under section 8-1 of the ITAA 1997.