Private ruling: Overseas travel expenses
Published: May 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for part of your return airfares from Australia to place A? | A1: No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You travelled to place A with your relative for a holiday. You paid for your airfares prior to your departure date. You did not receive a formal written invitation. The invitation was initiated when it was identified that you would be in Place A and arrangements were made for you to visit the facility. All correspondence was done over the phone or by email. Your visit was incidental to the trip. The trip to place A was organised before the invitation to view the facility.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1. | Income Tax Assessment Act 1997 Subdivision 900B. | Income Tax Assessment Act 1997 Section 900-50.

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. Your trip to place A was mainly devoted to a private purpose. Any expenses related to this trip are therefore not allowable deductions except for those expenses that are directly attributable to the earning of your assessable income. | Detailed Reasoning - Detailed Reasoning: Section 8-1 of the Income Tax Assessment Act 1997 (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, or relate to the earning of exempt income. A deduction is only allowable if an expense: · is actually incurred, · meets the deductibility tests and · satisfies the substantiation rules. | Detailed Reasoning - Deductibility tests: The deductibility of your overseas travel needs to be considered under general self-education principles outlined in Taxation Ruling TR 98/9. In accordance with TR 98/9, expenses of self-education are allowable if a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge. However, if the subject of the self-education is too general in terms of the taxpayer's income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. In your case, you travelled to the place A with your relative for a holiday and whilst there you visited a facility for a half day tour. .Although the trip may have broadened your knowledge and benefited you in your role; the courts have held that this reason alone is not enough to demonstrate a sufficient connection between the travel and the income-producing activities. In the Board of Review Case R47 84 ATC 380; (1984) 15ATR 824, the taxpayer, a French language teacher, claimed a deduction for part of the expenses in travelling to France. The trip was not undertaken at the request of the taxpayer's employer. She asserted that the trip increased her teaching skills. The Board of Review stated that the fact that the taxpayer became a better teacher because of the trip did not mean that expenses were incurred in the course of gaining her assessable income as a teacher. The expenditure was incurred in relation to a period during which the taxpayer was without obligation to render service to her employer. Notwithstanding that her experience would be of value when she resumed performing the duties of her employment, the essentially recreational nature of the journey did not alter. It is considered that your circumstances are similar to those in Board of Review Case R47 as although your tour of the facility was undertaken with the support of your employer, the request was made only shortly before you were due to leave. Your plans to go to pace A were already established well before your departure date. In other words, you were of no obligation to render your services to your employer before making your travel arrangements. In addition to this, the fact that you were on annual leave and your employer did not provide you with a travel allowance carry more weight towards the private purpose of your trip. Paragraph 65 of TR 98/9 states that if the travel was mainly devoted to a private purpose, such as having a holiday, and the gaining or producing of income was merely incidental to the private purpose, only those expenses directly attributable to the income-earning purpose would be allowable. An example is set out in Paragraph 69 TR 98/9 as follows: Example: Jenny, a doctor, was holidaying in Cairns when she became aware of a work-related seminar on the current treatment of cancer patients. The cost of the half-day seminar was $200. Jenny is able to claim a deduction for the cost of the seminar because it is directly attributable to an income-earning purpose. However, no part of her air fare to Cairns or her holiday accommodation is an allowable deduction. Your trip was mainly devoted to a private purpose and as such only those expenses directly attributable to the income-earning purpose would be allowable. You are not entitled to claim a deduction for part of your airfares.