Private ruling: Travel expenses
Date of advice: 5 February 2016
Published: March 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for the expenses you incurred in relation to your overseas trip? | A1: No.

Relevant facts and circumstances: You travelled overseas for work. You incurred the following costs: • Passport • Travel socks • Suitcase lock • Daypack • Travel towel • Suitcase

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 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 satisfy the tests in section 8-1 of the ITAA 1997, it must have the essential character of an outgoing incurred in gaining assessable income ( Lunney v. FC of T , Hayley v. FC of T (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166) and 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; (1949) 8 ATD 431; (1949) 4 AITR 236). Passport The expenses associated with acquiring passports relate primarily to the taxpayer's personal right to travel to an overseas destination. They closely parallel the costs associated with obtaining a driver's licence, which were characterised as being of a private nature ( Case P55 82 ATC 253; 25 CTBR (NS) 824 Case 117 ). While the holding of a passport is required for you to travel overseas for the excursion, it does not follow that the costs are deductible. Expenditure in obtaining a passport allows you to legally travel to different countries and is not sufficiently connected with your income earning activities. Furthermore, the associated expenses are considered to be private in nature. Accordingly no deduction is allowable under section 8-1 of the ITAA 1997. Suitcases In Case T78 86 ATC 1094 the Administrative Appeals Tribunal allowed a deduction to a barrister for airfares to attend a work-related course. However, the Tribunal held that his claim for travel insurance was expenditure of a private and domestic nature. Expenses such as insurance policies invariably cover items that are generally private in nature, for example illness, loss of baggage, and theft or damage to belongings. Similarly, the cost of purchasing luggage is private in nature and not deductible. The expense remains private even though the suitcases may have been specifically purchased for this trip. You are therefore not entitled to a deduction for your suitcase, daypack and suitcase lock under section 8-1 of the ITAA 1997 as the expenditure is private in nature. Travel socks and travel towel You also purchased travel socks and a travel towel. These are items that inherently have a private character. While your requirement for the items may be seen to be a consequence of your work trip, there is insufficient connection to the gaining or production of assessable income for a deduction to be allowed as the expenditure is too remote. Consequently, the expenses remain private or domestic in nature. Accordingly you are not entitled to a deduction for the travel socks and towel under section 8-1 of the ITAA 1977.