ATO ID 2001/415: Travel Expenses to Inspect Trust Property
Date of decision: 5 September 2001
Business line: Private Groups and High Wealth Individuals

Issue
Is a trust entitled to claim a deduction for travel expenses incurred by the trustee to inspect the premises of a company of which the trust is a shareholder?

Decision
No, the expenses are not deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as they are not incurred in relation to the gaining or producing of assessable income.

Facts
The trust owned shares in a company as a long term investor. The company organised an educational tour to one of its facilities for its shareholders to inspect. The trustee and a beneficiary of the trust accepted the offer. The expenses incurred included travel costs, travel insurance and taxi fares. The trust was a small shareholder of the company.

Reasons for decision
Summary: For an expense to be an allowable deduction it must be incurred in gaining or producing assessable income in accordance with section 8-1 of the ITAA 1997. Although the trust is entitled to receive dividends in respect of the shares that it owns, the amount of dividends that the trust will receive from its shareholding will neither increase nor decrease as a result of the trustee undertaking the inspection trip. Therefore, it is not possible to establish a connection between the dividends included in the assessable income of the trust and the travel expenses incurred. Furthermore, it is not possible to establish a connection between the travel expenses and the share value of the shares that the trust holds As it is not possible to establish a connection between the travel expenses incurred and the assessable income gained from the shares, the travel expenses are not an allowable deduction under section 8-1 of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 8-1
Subject references: Travel expenses Deductions & expenses Shares Shareholders