Private ruling: Travel expenses
Published: April 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Can you claim a deduction for travel expenses? | A1: No.

Relevant facts and circumstances: You are senior employee for an international firm. The firm prides itself on a culture that encourages staff members to be socially responsible. An extract from the firm's website promotes its charitable subculture. As a senior staff member you are also the chairman of a charitable committee (the committee). This role is voluntary, and not a requirement of your employment. Nor is it a paid position. The purpose of the committee is to raise funds to support communities in need, and to maintain the culture within organisation. During a fundraiser the committee raised an amount of money to be donated to X for upgrade and enhancement of schools in a foreign country. The Committee decided that instead of making a straight forward cash donation to X, you and some junior staff should travel to the country, not only to confirm where and how these funds where to be used, but as an ambassadors of the organisation. Your employer did not pay for or reimburse any travel expenses incurred by you and the junior staff. You and the junior staff where paid their normal wage during the seven day overseas trip. Whilst on the trip you were also required to take on a supervisory role for junior staff members. You incurred travel expenses during 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 by an individual 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. A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997: • there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the taxpayer's income-producing duties ( Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431) • it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income producing expense ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 7 AITR 166; (1958) 11 ATD 404). Whilst your employer fosters a subculture that is charitable in nature and your duties when overseas were conducted on paid work time, the travel expenses were incurred in your capacity as a volunteer with the committee, and are not considered to be incidental and relevant to your income-producing duties in your field at the organisation. Further the essential character of travel expenses incurred was for charitable purposes, and is therefore considered private or domestic. It is acknowledged that your senior position in the organisation may necessitate participation in the committee's activities, however this does not change the nature of, nor the purpose for which, the expenses were incurred. Therefore the expenses are not considered to be incurred in the course of gaining or producing your assessable income, and are not deductible under section 8-1 of the ITAA 1997.