Hello, I have been seeing a psychologist instead of a business coach for myself as a sole trader — because, this particular psychologist has helped me generate more income than the business coach I use for personal and professional development. May I use the psychologist fee I spend as a tax deduction? May I ask if there is a link on the ATO that can help me better understand this. Thank you.
Best to see a tax agent or ask ATO's technical assistance
Would need to follow self-education rules. The psychologist sessions would need to be directly related to your assessable income to be deductible.
May help to read the ruling TR 2024/3, https://www.ato.gov.au/law/view/document?docid=TXR/TR20243/NAT/ATO/00001
"Example 2 – personal development course deductible to the extent not reimbursed"
"Example 22 – cost of personal development course partially deductible"
Hi @SoleTraderCoach,
No, you can't claim psychologist fees as a tax deduction for your sole trader business. The expense needs to be directly related to earning your business income, not personal health or wellbeing. Even if the sessions have helped improve your business performance or income, they're considered a personal expense rather than a business one.
Business coaching fees may be deductible if they're directly related to running your business and help you earn income. The key difference is that business coaching directly relates to business skills and operations, while psychological services relate to a personal medical expense.
The general rule is that you must have spent the money for your business, you must have records to prove it, and the expense can't be for private use.
22 Apr 2024 · 6 min read time
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