Private ruling: Travel expenses
Published: March 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for the cost of upgrading your airfares when your travel is work related? | A1: Yes.

Relevant facts and circumstances: You regularly undertake work related travel. Your employer pays for all costs associated with the travel including the cost of economy class airfares. You incur expenses to upgrade the airfare to business class.

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. There must be a sufficient connection between the outgoing and the activities directed at gaining or producing assessable income. The decision in Ronpibon Tin v. FCT (1949) 78 CLR 47; (1949) 8 ATD 431, confirms that for an outgoing to be deductible under 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 gaining of the assessable income. Where airfares are part of the necessary cost of your work related activities they are deductible expenses. However, where the main purpose of the trip is for private or domestic purposes the expenses are not deductible. In your case, you undertake work related travel and your employer pays for an economy class airfare. You have incurred costs to upgrade your ticket to a business class airfare. As your travel is work-related, you are entitled to a deduction for the costs you incur to upgrade your ticket.