Private ruling: Work related expenses
Published: March 2013
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Question and answer | Are you entitled to a deduction for the work-related portion of your overseas travel expenses? | Yes


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 (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 or a provision of the ITAA 1997 prevents it. To determine whether your expenses are deductible, the essential character of the expenditure must be considered. It is necessary to determine whether there is a sufficient nexus between the expenditure and your current income-earning activities. Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business considers occasions where travel expenses may have the essential character of an income-producing expense. Whilst the ruling discusses self-education expenses the principles contained in it are relevant to your situation. TR 98/9 explains that airfares and travel expenses incurred on overseas study tours or sabbaticals may be deductible if the necessary connection with a person's income producing activity exists. TR 98/9 discusses the circumstances in which self-education expenses are allowable, one of these principles provides that a deduction is allowable for self-education expenses if the 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. In your case, the expenses were relevant to the activities for which you produce your income. The various activities you undertook as part of the tour will enable you to maintain and even enhance or improve your knowledge, learning and skills in your position. Furthermore, the tour was attended specifically by others in your industry and was promoted as an industry tour to see firsthand the major developments across Country X and to experience practices that have been successful in environmentally friendly ways. Therefore, there is sufficient connection between the portion of the travel expenses you wish to claim and your income-producing activities. Accordingly, the proportions of your tour expenses that relate to the days you spent experiencing related activities are deductible under section 8-1 of the ITAA 1997.

Relevant facts: You are employed as a manager in a specific industry. | You attended a tour to Country X which you were encouraged to attend by your employer. | You took annual leave to attend the tour and you paid for it with your own funds. | The tour was designed to showcase to various individuals in your industry the major developments of the industry across Country X as well as visiting the many cultural highlights of Country X. | The tour was attended specifically by people working in your specific industry and was promoted as a tour to see firsthand the major industry developments across Country X and to experience industry practices that have been successful in environmentally friendly ways. | You wish to claim X% of the total price of the tour which represents Y days of the tour you believe directly relates to your employment.