Private ruling: Deduction for travel expenses
Date of advice: 18 November 2015
Published: January 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for expenditure on a trip overseas? | A1: No.

Relevant facts and circumstances: You are a teacher. You travelled to several countries over a one month period. In these countries you visited various sites. Your reason for travelling overseas was to have an education experience to enhance your role as a teacher. You selected locations to visit that were a direct relevance to the specific syllabus that you teach. You were able to view first hand sites and observe significant important items to improving your understanding of your work and enable you to better educate your students. Your employer did not request that you travel overseas and you did not receive financial support. You took personal leave and scheduled holidays for your travel and you travelled with your family. You did not maintain a travel diary, but you have a detailed itinerary and kept receipts.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 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. Travel expenses may be deductible where they form part of the taxpayer's self-education expenses. The High Court of Australia has indicated that the expenditure must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478 at 497 498; (1958) 11 ATD 404 at 412). There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 at 56; (1949) 8 ATD 431 at 435). Consequently, it is necessary to determine if there is sufficient connection between your trip and the gaining of your assessable income. Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case. Taxation Ruling IT 2198 deals with allowable deductions for voluntary expenditure incurred by employee taxpayers. Paragraph 13 states that the Taxation Boards of Review have seen a number of teachers seeking income tax deductions for overseas travelling expenses. Most of the claims were rejected because the teachers were not able to establish a positive connection between the overseas travel and the performance of their duties of employment as teachers. In the ultimate the claims have been based on a general proposition that the overseas travel has made the taxpayers better able to carry out their duties which, of itself, is not sufficient to enable the expenditure to be allowed as a deduction. In Case R94 84 ATC 628 a college librarian was disallowed overseas travel expenses in making a study tour of China organised by the Library Association. The benefits derived by the taxpayer might have made her a better librarian, but the nexus between the outgoings and deriving assessable income was too remote. The taxpayer voluntarily made the trip and the expenditure was essentially of a private nature. In Case U109 87 ATC 657, the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He undertook a 17 day trip to Indonesia organised by a natural museum history society of which he was a member. During the course of the trip he visited several volcanoes and other geological sites, and attended a geological congress. He also visited some tourist attractions. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return. The Administrative Appeals Tribunal (AAT) examined previous court decisions and concluded that the trip was essentially recreational in character and not deductible. The AAT also stated that some taxpayers are fortunate in finding personal and recreational satisfaction in their field of endeavour and that in this case the trip was recreational in character and not deductible. The circumstances of your case can be compared to the above decisions. It is acknowledged that the travel will provide you with first-hand knowledge, but it does not in itself mean that the expenditure is incurred in gaining or producing your assessable income. The trip may broaden your knowledge and benefit you; however, as with the cases quoted above, the courts have held that these reasons alone are not enough to demonstrate a sufficient connection between the travel and your income-producing activities. Taxation Ruling TR 95/14 is a ruling that applies to employee teachers and deals with in part deductions for work-related expenses generally claimed by employee teachers. This ruling states: | Detailed Reasoning - Self education expenses: 188. A comprehensive explanation of the treatment of self education expenses is contained in Taxation Ruling TR 92/8. Key points include: (a) A deduction is allowable for self education expenses if the education is directly relevant to the taxpayers current income-earning activities. This particularly applies if a taxpayer's income-earning activities are based on skill/knowledge and the education enables him or her to maintain or improve that skill/knowledge. (b) A deduction is allowable if the education is likely to lead to an increase in the taxpayer's income from his or her current income-earning activities. (c) A deduction is not allowable if the education is designed to enable a taxpayer to get employment, to obtain new employment or to open up a new income-producing activity ( FC of T v. Maddalena 71 ATC 4161; 2 ATR 541). (d) Self education includes courses undertaken at an educational institution (whether leading to a formal qualification or not), attendance at work-related conferences or seminars, self-paced learning and study tours. (e) Self education expenses include fees, travel expenses (e.g., attending a conference interstate), transport costs, books and equipment. Self-education expenses are allowable as a deduction if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the 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. You travelled overseas visiting many sites which you consider is relevant to the syllabuses you teach. Although the trip may have broadened your knowledge and benefited you as a teacher, the courts have held that this reason alone is not enough to demonstrate a sufficient connection between the travel and the income producing activities. Therefore your trip is not considered to have a sufficient connection to the duties of your employment. Accordingly, the expenses you incurred in respect of your overseas trip are not allowable as a self-education expense.