Private ruling: Self-education expenses
Published: October 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for expenses incurred during an overseas trip? | A1: No.

Relevant facts and circumstances: You are employed as a teacher of language at a senior school. You accompanied some teaching staff members of a school and students on an overseas trip to country A. You went in the capacity of a translator and teacher. As the students are all minors, your colleagues and yourself had 24 hour care for them during the trip. You were not a paid employee of the school and you undertook the overseas trip with personal leave from your employment. You were not paid to attend the trip and none of the expenses were reimbursed to you. You were asked to attend the trip as the language of the destination country is not taught at he school and it was felt important to have a teacher attend who can speak and understand the language. You provided six weeks of free language and cultural information to the students at their school prior to the trip. This was done in your own time. The courses that you teach require teachers to assist students to make links with the country A culture and daily life and our lives in Australia. It also requires you to demonstrate reasons for tourism and contact between country A and Australia. An example of this is the flourishing tourism industry between country A in relation to war times. You have expanded your knowledge of the current culture and life in country A and have gained firsthand knowledge of the wars fought by Australians in country A, as well as places associated with Australian soldiers and their wartime activities. You have attended an Anzac Day Ceremony and will incorporate these strong bi-lateral links into your courses for both senior and middle school programs. You took many photos and bought resources to bring to your teaching in order to enrich and explain both historical and current ties with country A. While it is not a condition of your employment duties to attend the trip, it is important to maintain and improve the strength and level of country A language you speak. It is also important to keep abreast of current language changes and culture in order to remain an informed teacher. Should you seek promotion, this aspect of linguistic and cultural competency would be important. On completion of the trip you have not received an increase in income from your current income earning activities. Your current employer would like to see overseas trips offered to your students. It is anticipated that such a trip will take place in the future. A part of your reason to attend the trip was to learn how to conduct such an overseas trip. You travelled to another country on completion of the tour. No friends or family members accompanied you on the trip.

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. Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses 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. Similarly if the study of a subject of 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, a deduction is allowable. TR 98/9 explains that airfare expenses incurred on overseas study tours or sabbatical, on work-related conferences or seminars, or attending an educational institution are deductible if the necessary connection with a person's income producing activity exists. However, the ruling also explains that 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. In Case U120, 87 ATC 721, the taxpayer was a schoolteacher, teaching English principally to Asian girls. She claimed a deduction for expenses incurred while touring schools and attending teaching sessions for three weeks in Bandung, Indonesia. The taxpayer supported her objection by referring to two promotions obtained by her a year after her return from Indonesia, one of which enabled her to become a form supervisor, entitling her to an increase in salary. The objection was disallowed on the basis that the taxpayer could not establish that the outgoings were incurred in gaining her assessable income. Although the taxpayers principal purpose in touring was to improve her ability as a teacher of English as a second language, that consideration was not enough to connect the travel with her income-earning activities. Further, the particular experience obtained by her in Bandung could not be said to be relevant to her promotion and consequent increased salary or new position. In Case Q83 83 ATC 418, the taxpayer, a high school French and Indonesian language teacher, travelled overseas with her husband. She claimed a deduction for travel expenses relating to time spent in France and Indonesia. The taxpayer conceded that promotion did not depend on travelling overseas. The AAT upheld the Commissioner's assessment stating 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. In your case, you participated in a trip to country A for professional development purposes, to provide language translations and support for the group and to act in a capacity as a teacher on the trip. Your circumstances can be compared to the above decisions, in that the trip to country A may make you a better teacher, but the knowledge that you have gained is too general in nature for the expenses to be incurred in the course of gaining your assessable income as a language teacher. Further, the trip has not directly lead to, or is not likely to lead to an increase in your income from your current income earning activities. Therefore the trip to country A 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 deductible under section 8-1 of the ITAA 1997. Please note, although the trip may assist in you being a guide/leader for such a school tour in the future with your current employer, again the expense is not considered to have a sufficient connection to the duties of your current employment.