Private ruling: Work related expenses - self-education - overseas travel
Published: February 2015
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for travel expenses? | A1: No.

Relevant facts and circumstances: You are an employee. You travelled overseas. During your travel you visited various museums, galleries, cathedrals and tours which have historical, geographical and artistic significance which you believe enhanced your professional knowledge and skills. The duration of your travel was X days and you estimate that you spent X of those days visiting museums, galleries and cathedrals and attending tours.

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

Reasons for decision: Summary: Your travel expenses are not considered to have a sufficient connection to your employment duties to be incurred in the gaining or producing of your assessable income. The connection of these expenses to your gaining or producing of assessable income is considered to be too remote. Your travel expenses are considered to be private in nature and therefore not an allowable deduction. | 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. Travel expenses may be deductible where they form part of a taxpayer's self-education expenses. Taxation Ruling TR 98/9 states 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 (TR 98/9 paragraph 42). TR 98/9 also provides that if the self-education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction. 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 R47 84 ATC 380; (1984) 15 ATR 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. 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 dealing with teachers who had claimed for the cost of overseas travel. It 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 would have broadened your knowledge and provided you with first-hand experience that could be applied in your employment. 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. While we acknowledge the cultural and social benefits, the knowledge to be gained from your travel is too general in nature for the expenses to be incurred in the course of gaining your assessable income. There are many experiences and places of interest which may help a in your professional role; however, this does not mean that the associated expenses are automatically deductible. The purpose of your overseas travel was essentially recreational and private in nature. It is considered that there is not a sufficient connection between your travel expenses and your income earning activities. Accordingly, the costs you incurred in relation to your travel are not deductible under section 8-1 of the ITAA 1997.