ATO ID 2001/615: Deductibility of travel insurance
Date of decision: 23 July 2001
Year of income: Year ended 30 June 2000
Business line: Small Business/Individual Taxpayers

Issue
Is the taxpayer entitled to a deduction for travel insurance under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
No. The taxpayer is not entitled to a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private in nature.

Facts
The taxpayer was granted an International Teaching Fellowship in Canada. The taxpayer incurred expenses for airfares and travel insurance.

Reasons for decision
Summary: Section 8-1 of the 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. Expenses such as insurance policies invariably cover items that are generally private in nature, for example illness, loss of baggage, and theft or damage to belongings. In Case T78 [1986] AATA 318; 86 ATC 1094 the Administrative Appeals Tribunal (Tribunal) allowed a deduction to a barrister for airfares to attend a work-related course. However, the Tribunal held that his claim for travel insurance was expenditure of a private nature. In Waters v. FC of T [2010] AATA 846; 2010 ATC 10-157 the Tribunal held that a taxpayer who had acquired travel (including medical) insurance prior to commencing work overseas was not entitled to a deduction for this expenditure. The expenditure could not be regarded as being incurred by Mr Waters 'in the course of' gaining or producing his assessable income, and was otherwise not deductible as it was an expense of a private or domestic nature. The taxpayer is therefore not entitled to a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private in nature.

Legislative references: Income Tax Assessment Act 1997 section 8-1
Case references: Case T78 [1986] AATA 318 86 ATC 1094
Subject references: Overseas travel expenses