Private ruling: Travel expenses
Date of advice: 23 June 2017
Published: August 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for your overseas travel, accommodation and meal expenses? | A1: No.


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 and the gaining or producing of your assessable income. Rather, these expenses are considered to be too general 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 or are necessarily incurred in carrying on a business for the purpose of 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. A number of significant court decisions have determined that for an expense to be an allowable deduction: ● it 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 ; (1958) 100 CLR 478, ● there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T , (1949) 78 CLR 47 ( Ronpibon’s case) ), and ● it is necessary to determine the connection between the particular outgoingand the operations or activities by which the taxpayer most directly gains orproduces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). To determine whether the 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. The intention or purpose in incurring an expense can be an element in determining whether the whole or part of the expense is an allowable deduction. In your case, it is not considered that the expenses are incurred in gaining assessable income. You travelled overseas to consider the purchase of a specialised taxi cab. You were not engaged in an income producing activity when you travelled overseas; rather you were considering whether or not to purchase a vehicle which would have earned you income. You were not actually earning income. 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 and accommodation are not deductible under section 8-1 of the ITAA 1997. The purchase of a vehicle which will be used for an income producing purpose, such as a taxi, is generally a capital expense. This capital expense would be depreciable over a period of time, however as you did not purchase the taxi, there is no provision to consider the depreciation of the capital expense.

Relevant facts: You travelled overseas to research a specialised taxi cab. | Because of Uber taxi’s the future of taxi’s now is unsecure. You have now decided not to proceed with the purchase. | You received advice from a taxi sales person that your travel and accommodation would be tax deductible against your Australian business.