Income tax: is a professional sportsperson who is required to take out private health insurance entitled to a deduction for related contributions under subsection 51(1)?

No. The contributions paid to a private health fund by a sportsperson are not deductible under subsection 51(1) of the Income Tax Assessment Act 1936 because: (a) the expense is of a private nature; (b) the expense is not sufficiently connected to the sporting activity that produces that income; and (c) the expense is a precondition to earning income. Lockhart J said in FC of T v Cooper 91 ATC 4396, (1991) 21 ATR 1616, "the deductibility of... [an expense]... depends upon determining the essential character of the expenditure itself and not upon the fact that, unless it is incurred, the taxpayer will not be able to engage in the activity from which his income is derived."

A deduction is not allowable whether or not the expense of private health insurance is a condition of employment. Example A professional footballer enters into a playing contract with a first grade rugby league club. A clause of the contract requires the player to take out private health insurance. The player is not allowed a deduction for contributions made to the health insurance fund.