Edited version of your written advice

Authorisation Number: 1012724250468

Ruling

Subject: Counselling expenses

Question

Are you entitled to a deduction for the counselling expenses incurred?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2014

The scheme commences on:

1 July 2013

Relevant facts and circumstances

You are an employee.

You incurred expenses on counselling sessions.

You undergo the counselling as you do not find sufficient reflective and effective opportunities at work to support you to deal with crisis and stress and prevent burn out.

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, relate to the earning of exempt income or a provision of the ITAA 1997 prevents it.

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current income earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge.

Similarly, 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, a deduction is allowable.

In determining whether the cost of psychoanalyst counselling sessions incurred whilst you are employed is deductible, a relevant connection between your income-earning activities and the counselling 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.

In Case QT94/45 (Unreported, AAT, Brisbane, Mr Beddoe (Senior Member), 3 February 1995) a school principal sought to claim a deduction for the cost of visits to a doctor, therapist, psychiatrist and a psychologist. The treatments involved counselling. The reason for the visits was that the taxpayer was having difficulties at work, causing stress and apprehension as to professional capacity as a school principal.

The Administrative Appeals Tribunal decided:

The essential character of the outgoings in this case is expenditure incurred by the applicant to better equip herself in both a mental and physical sense for her duties as a school principal...the outgoings were incurred because of the perceptions of the applicant as to her own physical wellbeing and also as to her capacity as a school principal.

...the outgoings were neither relevant nor incidental to the applicant's income producing activity...the outgoings are of such a nature as to be correctly characterised as private expenditure and are excluded from deduction...

While we acknowledge that the counselling sessions may provide some benefit while you undertake your employment, it is considered that the sessions predominately support your wellbeing rather than providing you with the skills or knowledge to perform your employment duties. Further, they are considered to be too general in relation to your current employment. Therefore, you are not entitled to a deduction for your counselling sessions under section 8-1 of the ITAA 1997.