Private ruling: Deductibility of accommodation expenses
Date of advice: 15 February 2017
Published: July 2017
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for the rental expenses incurred during your overseas sabbaticals? | A1: No

Relevant facts and circumstances: You are employed by as a professional at a learning institution. Sabbatical 1 You left Australia to undertake a sabbatical work placement as part of your employment. As a result of undertaking this sabbatical you were required to travel overseas where you worked with a colleague on various aspects of your research in your chosen profession. During this sabbatical you were accompanied by you partner. While undertaking this sabbatical you and your partner rented an overseas property. During this sabbatical you incurred rental expenses. The sabbatical concluded after a number of months. Sabbatical 2 You left Australia to undertake a second sabbatical work placement. This sabbatical took place in an overseas country, where you worked with a colleague on aspects of your chosen profession. During this sabbatical you were once again accompanied by you partner. While undertaking this sabbatical, you and your partner rented an overseas property. During this sabbatical you incurred rental expenses. This sabbatical concluded after a number of months. Prior to the commencement of your first sabbatical you rented your primary residence for the duration of your two sabbaticals. You have provided documentation to support that you incurred rental expense for both sabbaticals. During both sabbaticals you continued to receive you salary.

Relevant legislative provisions: Income Tax Assessment Act 1936 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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business , discusses the Commissioners views on the circumstances under which self-education expenses are allowable as a deduction. Expenditure on accommodation ordinarily has the character of a private or domestic expense. This is due to the fact that while accommodation expenses are necessary to place an individual in a position to earn assessable income, the expenses are not directly related to the individuals income earning activities. However, the occasion of the outgoing may operate to give the expenditure the essential character of an income-producing expense. Paragraph 89 of Taxation Ruling TR 98/9 States: Where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meal expenses incurred are deductible under section 8-1. (Examples include an overseas study tour or sabbatical, a work-related conference or seminar or attending an educational institution.) They are part of the necessary cost of participating in the tour or attending the conference, the seminar or the educational institution. We do not consider such expenditure to be of a private nature because its occasion is the taxpayer's travel away from home on income-producing activities. However, paragraph 24(c) of TR 98/9 states: expenditure on accommodation and meals where a taxpayer who has travelled to another location for self-education purposes has established a new home. Paragraph 93 of TR 98/9 lists the key factors to be taken into account in determining whether a new home has been established. These factors include: ● the total duration of the travel ● whether the taxpayer stays in one place or moves frequently from place to place ● the nature of the accommodation, e.g., hotel, motel, or long term accommodation ● whether the taxpayer is accompanied by his or her family ● whether the taxpayer is maintaining a home at the previous location while away, and ● the frequency and duration of return trips to the previous location. The question of whether a new home has been established depends on all the facts. There is no one test to satisfy all the circumstances. TR 98/9 provides a number of examples designed to illustrate factors and circumstances that are relevant in determining whether a taxpayer has established a new home in the new location. Most applicable to your case is Example 5 at paragraphs 104 and 105 which states: Katherine travelled overseas for six months to study at a university in Germany. She was accompanied by her husband and three children. An apartment suitable to accommodate the family was rented for the period of her stay and the family home in Australia was rented out. The relevant factors are the period of time away, the renting of the family home and staying in one place with her family. These factors indicate that a new home was established in Germany. In your case, you went on two sabbatical work placements as part of your employment. The first sabbatical for a number of months and the second being for a period of a number of months. On both occasions you were accompanied by you partner and you lived in a rental property at each destination for the entirety of your stay. Further your home in Australia was rented out during both sabbaticals, indicating you did not maintaining a home in Australia. Consistent with the principles established in TR 98/9, the Commissioner is satisfied that you had established a new home in each of the countries that you served your sabbaticals. While it is acknowledged that you did not stay for periods of greater than six months as per the above example, this is but one of the factors used to determine whether a new home has been established. Further, the Commissioner is satisfied that based on the other factors, the two periods that you travel overseas were sufficient to establish a new home in each of the countries that you served your sabbaticals. Therefore the accommodation expenses that you have incurred are private or domestic nature. Accordingly, you are not entitled to a deduction for the accommodation expenses you incurred while serving on your sabbaticals in both USA and Italy under section 8-1 of the ITAA 1997.