Private ruling: Work related deductions – Travel
Date of advice: 5 December 2017
Published: April 2018
Ruling period: Period ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to a deduction for the costs you incurred to travel to an annual staff conference? | A1: Yes | Q2: Are you entitled to a deduction for the costs you incurred to travel to an overseas destination? | A2: No | Q3: Are you entitled to a deduction for the costs you incurred to travel to a Function? | A3: No | Q4: Are you entitled to a deduction for the costs you incurred to travel to a Conference Awards Night? | A4: No | Q5: Are you entitled to a deduction for the costs you incurred to travel to a conference? | A5: Yes | Q6: Are you entitled to a deduction for the costs you incurred to travel to a country? | A6: No | Q7: Are you entitled to claim a deduction for the following: ● Travel Insurance and ● Passport photo? | A7: No

Relevant facts and circumstances: Your role was as a Team Leader. You had managerial responsibility. Your duties as a manager included the following: ● Welcome each staff member with positive attitude every day ● Manage staff lunch breaks and days off ● Delegate office duties and oversee delegated tasks / duties are completed ● Run meetings with all staff ● Encourage all staff with their daily work and keep them time conscious ● Be available to all staff members for all problems ● Be sensitive and show consideration for the needs and differences of others ● Show strong leadership skills ● Create sales targets with each staff member ● Break these down into small targets that are attainable ● Train every staff member in the full Sales process ● Follow-up all Key Point Indicators with staff member to ensure complete understanding. ● Complete selection of file analysis for each staff member. ● Measure & assess staff performance and conduct one-on-one appraisals to discuss strengths & weaknesses ● Give praise readily and criticism gently, providing constructive feedback to improve performance with Action plans ● Follow-up with staff on any deadlines set, and Mentor any staff that require stronger direction ● Assess what motivates staff and create incentives in-line with this ● Implement incentives and motivate all staff ● Arrange staff roster on calendar with no overlapping, recording absence ● Email all staff weekly jobs roster ● Motivate the Team by providing an environment in which individual needs are recognised and respected. ● Attend Managers meetings with local area Managers ● Attend Annual Conference with Owner ● Attend Annual Awards night ● Escort Staff conferences ● Escort Group tours with clients ● Manage transfers to / from airport for Groups tours not escorted ● Identify and implement local marketing promotions. ● Take initiative and responsibility for local marketing ● Discuss new ideas with Owner / Area leader for any approvals required ● Help organise monthly events with local area offices ● Implement changes immediately when advised by head office ● Ensure complete confidentiality with all deals ● Be ambitious to receive awards for Office Sales Achievements ● Email to Owner / Area leader with update on targets ● Meet with Owner / Area leader for office update ● Clear understanding of administration requirements ● Implementation of business plans and budgets as approve by Owner / Area Leader ● Discuss progress of office targets with Owner / Area leader. ● Support Head office decisions in team meetings. ● Stay aware of local marketing trends and act on opportunities ● Maintain Quality control of communication and customer service standards ● Have exceptional time management, and be flexible with frequently changing and conflicting priorities. ● Take responsibility for operational performance. ● Complaint handling ● Set action plans in place for training if required with deadlines ● Offer all assistance to improve sales figures with deadlines ● Notate every meeting with date and time ● Accounting - Ensure all files are balanced, and client funds used correctly. ● Balance Client account bank statements and Ticket statements ● Balance Insurance statement and have accounts ready for reconciliation You do not hold travel diaries or similar documentation for your travel greater than six days, Your employer supports your travel. Your travel insurance is a Business Annual Multi trip cover. The insurance policy does not include cover for the loss of wages. You did not receive travel allowance or any reimbursement for any expenses incurred. You attended an annual staff conference completing sales training sessions. You stayed at a specific location with fees included. You attended a conference with the owner where you were employed at. You attended a function, at the event you received a small training update session on products followed by dinner. You travelled to Conference and an Awards Night. You travelled to a Staff Conference for annual staff training including the topics setting an agenda on sales/targets and manager duties, you attended these session with a colleague. You travelled overseas the ticket advice for air tickets show booking confirmation in two names. You have confirmed vehicle rental details for two adults, confirmation for a standard car with the lead name being for another individual. You have confirmation for accommodation for documentation with a Lead Name of another individual. You have a receipt for Passport Photo. You advised your travel to overseas was for the purpose of escorting a group. This role involved being available for any questions or assistance the group may require as well as to assist with transfers in airports/allocation of rooms at hotels. On your trip you advised that you received a free room and you were invited to bring along a friend, your friend joined you on the trip whilst performing your escort duties. You have booking confirmation received for one room for two adults for a night. For the same night you have a hotel Voucher stating service is payable by a business only payment for extras to be collected from the client. Accommodation booking summary lists Lead Name as another individual for two nights at a cost Tax invoice for a period for two passengers at a cost.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 32-5 | Income Tax Assessment Act 1997 section 32-10 | Income Tax Assessment Act 1997 section 32-20 | Income Tax Assessment Act 1997 section 32-45 | Income Tax Assessment Act 1997 subdivision 900-B | Income Tax Assessment Act 1997 subdivision 900-E | Income Tax Assessment Act 1997 Subdivision 900-F

Reasons for decision: Summary: You attended an annual staff conference overseas. A link can be established between this travel and your employment. As a manager for a business, there is a direct correlation between your employment and the annual staff conference. You are entitled to make a claim for all associated expenses. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) provides a deduction from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income; or it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. Taxation Ruling TR 98/9 provides that airfares incurred on overseas study tours or sabbatical, on work related conferences or seminars or attending an educational institution are deductible under section 8-1 of the ITAA 1997. They are considered part of the necessary costs of participating in the tour or attending the conference or seminar or the educational institution. In your case you attended the annual staff conference conducted by a business; you indicated the purpose of this conference was training sessions related to sales. As sales are a primary component of your employment a deduction for the related expenses is allowable. | Summary: A deduction is only allowable if an expense is actually incurred, meets the deductibility tests and satisfies the substantiation rules. You do not have a travel diary or similar document therefore you do meet the substantiation rule for your travel. | Detailed Reasoning - Detailed reasoning: Deductibility of work-related expenses are allowable if an expense: ● is actually incurred, ● meets the deductibility tests and ● satisfies the substantiation rules. A deduction is allowable for the cost of travel (accommodation, fares, meals and incidentals) incurred when travelling in the course of employment, for example, travel interstate and/or overseas. Special substantiation rules apply. If an expense is incurred partly for work purposes and partly for private purposes, only the work-related portion is an allowable deduction. Special substantiation rules apply to expenses in relation to overseas and domestic travel (ITAA97 Div 900: s 900-1 to 900-250). The effect of the substantiation rules is that domestic and overseas travel expenses are not deductible unless the following two conditions are satisfied: (1) Written evidence must be obtained by the taxpayer in respect of expenses relating to travel, regardless of length of absence from home. In the case of a business travel expense (ie a travel expense incurred in producing income other than salary or wages), written evidence need only be kept if the travel involved at least one night away from home. (2) Travel records (ie a travel diary or similar document) must be kept by a taxpayer where the taxpayer was away from the ordinary place of residence for six or more consecutive nights. The records must contain particulars of each business activity undertaken during the relevant travel. Entries must be made before the activity ends or as soon as possible afterwards, setting out: (a) the nature of the activity; (b) the day and approximate time when it began; (c) how long it lasted; and (d) where the activity took place. As outlined in Section 900-155 of the ITAA 1997. “You need not record an income-producing activity. But if you don't, the activity cannot be taken into account in working out the extent to which you can deduct an expense you incur for the travel. | Detailed Reasoning - Example:: If you fly to Los Angeles for the sole purpose of attending a seven day conference, but you don't record the conference in your travel record, you cannot deduct the cost of the air fare. This is so even if you have written evidence that you paid the fare (eg a receipt), as required by Subdivision 900-E.” In your case you travelled for a period greater than six days. In your response to providing a copy of your travel diary you responded with “N/A”, it was confirmed in phone contact with your Tax Agent you currently do no hold a travel diary or a similar document. The purpose of a travel diary is to show what activities were undertaken in the course of producing assessable income, so that expenses or portions of those expenses can be attributed to those income-earning activities. It is not a record of expenses incurred during the travel. Whilst it is acknowledge that you hold receipts for expenses incurred whilst travelling including Air fare costs, however as you do not satisfy the requirement of substantiation you cannot claim any of your expenses. | Summary: Your attendance at an function is seen primarily as entertainment with a small work related component being training update session. You are not entitled to make a claim for the incurred expenses. | Detailed Reasoning - Detailed reasoning: Paragraph 8-1(2)(d) states that you cannot deduct a loss or outgoing under this section to the extent that a provision of this Act prevents you from deducting it. Section 32-5 of the ITAA 1997 denies a deduction under section 8-1 to the extent that you incur a loss or outgoing in respect of providing entertainment. Subsection 32-10(1) of the ITAA 1997 defines entertainment as entertainment by way of food, drink or recreation; or accommodation or travel to do with providing entertainment by way of food, drink or recreation. Subsection 32-10(2) of the ITAA 1997 states further that you are taken to provide entertainment even if business discussions or transactions occur. Examples of what entertainment entails include business lunches or social functions. On the other hand, examples of what is not entertainment include theatre attendance by a critic or a restaurant meal of a food writer. In your case you indicated you attended a function. This event is seen as primarily entertainment with a small component consisting of a training update session. Entertainment expenses are generally not deductible. This includes the cost of business lunches, and attendance at sporting events, gala or social nights, concerts or other similar functions or events. This is the case even if business matters are discussed at the events. If something more substantial than light refreshments are served, entertainment is being conducted. Therefore a deduction for the related expenses is not allowable. | Summary: You attended a Conference and Awards Night as the manager for a business this would primarily have the characteristics of entertainment. You are not entitled to make a claim for the incurred expenses. | Detailed Reasoning - Detailed reasoning: In your case you indicated you attended the Conference and Awards Night. Whilst you advised attendance at this conference was to update your skills, no evidence has been provided with details of the conference and/or skills gained. Awards Nights take on the characteristic of entertainment. Entertainment expenses are generally not deductible. This includes the cost of business lunches, and attendance at sporting events, gala or social nights, concerts or other similar functions or events. This is the case even if business matters are discussed at the events. If something more substantial than light refreshments are served, entertainment is being conducted therefore a deduction for the related expenses is not allowable. | Summary: You attended a conference; as a direct connection can be established between the purpose for the travel and your employment. You are entitled to make a claim for all associated expenses | Detailed Reasoning - Detailed reasoning: In your case you attended a conference; you indicated the purpose of this conference was training sessions related to sales/targets and manager duties. As a manager for a business, there is a direct correlation between your employment and the annual staff conference. These topics relate directly to your employment therefore a deduction for the related expenses is allowable | Detailed Reasoning - Question 6: You travelled to a country; a deduction is only allowable if an expense is actually incurred, meets the deductibility tests and satisfies the substantiation rules. As you do not hold a travel diary or a similar document, you do not meet the substantiation rules, therefore no deductions are allowed. | Detailed Reasoning - Detailed reasoning: In your case you travelled for a period greater than six days to a country. You currently do no hold a travel diary or a similar document. The purpose of a travel diary is to show what activities were undertaken in the course of producing assessable income, so that expenses or portions of those expenses can be attributed to those income-earning activities. It is not a record of expenses incurred during the travel. Whilst it is acknowledge that you hold receipts for expenses incurred whilst travelling including Air fare costs, however you do not satisfy the requirement of substantiation therefore you cannot claim any of your expenses. | Summary: Travel insurance and expenses related to Passports including passport photos are seen to be mainly private in nature therefore a deductions for these expenses are not allowable. | Detailed Reasoning - Travel insurance: Premiums paid by employees for travel insurance would not normally be deductible even if the travel is work-related. The ATO Interpretative decision ATO ID 2001/615 states that a deduction is not allowable for travel insurance as the expenditure is private in nature. Expenses such as travel 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 86 ATC 1094 the Administrative Appeals 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 and domestic 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. You are therefore not entitled to a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private in nature. | Detailed Reasoning - Passport photos: The expenses associated with acquiring passports relate primarily to your personal right to travel to any overseas destination. So, passport expenses are generally private in nature and not deductible. They closely parallel the costs associated with obtaining a driver's licence, which were characterised as being of a private nature ( Case P55 82 ATC 253; 25 CTBR (NS) 824 Case 117 ). Accordingly, you are not entitled to a deduction under section 8-1 of ITAA 1997 for the cost of obtaining your passport photo.