Can I Claim Rent If I Sublet a Therapy Room as a Psychologist?

If you're a psychologist or allied health professional who rents out a therapy room, especially if you're subletting from a larger practice, then the short answer is yes, but with conditions. 

Correctly claiming rent on your tax return can reduce your taxable income, which will help save money on tax and stay compliant with the ATO. If you don’t do it correctly, you could trigger audits or penalties. Many practitioners are unsure of how subletting arrangements affect their deductions, so let’s clear that up.

1. The Basics: When Rent Is Tax-Deductible? 

In general, rent paid for a business related space such as a therapy room is a legitimate tax deduction. However, to qualify, you must meet certain criteria. 

You must be using the space to generate income, which means seeing clients or operating your private practice.

The expense should also be proportionate and well documented. This means having a formal lease agreement in place and keeping clear records of all payments. 

Best Practice: Always have a written lease or sublease agreement. Relying on verbal agreements or making casual cash payments can cause problems if your tax return is reviewed by the ATO. 

2. Subletting vs. Renting a Full Premises 

If you're subletting a therapy room, the ATO sees you as a tenant, not the property owner.

This means: 

• You can still claim the rent if the expense is incurred in earning income.  

• But you can’t claim deductions for areas or days when you don’t have exclusive or regular access, unless the arrangement specifies shared access terms.  

  
  

Tip: If you pay a flat monthly fee to access a shared space (e.g. 3 days per week), make sure your agreement outlines that specific use. This helps justify the proportion of rent you’re claiming. 

3. Common Pitfalls to Avoid 

No documentation: Not keeping records of payments or having no formal sublease can make your claim questionable. 

Overclaiming: Trying to claim 100% of rent when you only use the space part-time or share it with others. 

 Personal use: Using the therapy room for non-business purposes can invalidate part of the deduction. 

Tips from Experience: What We Tell Our Clients 

At our firm, we often advise psychologists to: 

• Make sure there is clear sublease: This protects you and provides proof for the ATO. 

• Record everything: Use accounting system or even a simple spreadsheet can make tax time easier and safer. 

• Ask before you claim: If unsure, ask your tax advisor. It’s easier than dealing with an audit later. 

  
  

Need help working out if your business rent is deductible?  

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