Private ruling: Self-education expenses - overseas travel
Published: January 2012
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you entitled to a deduction for travel expenses? | A1: No.

Relevant facts and circumstances: You are a school teacher. You took long service leave. During this time you travelled overseas on two occasions. On both occasions, the travel was arranged by you personally and was not a requirement of your employer. On both occasions you were accompanied by your spouse and your children. You visited various cultural and historical sites which you believe enhanced your professional knowledge and skills. You also visited various schools including a school where you shadowed other teachers. You arranged to attend these schools personally and it was not a requirement of your employer You found the school visits rewarding and they gave you new resource ideas to use in your teaching. You state that the travel was planned to improve your classroom practise through experiential learning and to strengthen your chances of obtaining a promotion within the leadership team of your school. Subsequent to your travel, you applied for and where successful in obtaining an additional leadership position. This additional role increased your income and responsibilities. You believe that it would have been possible to obtain these career advancements without having travelled overseas. However, you believe that is was as a result of your travel experiences that you gained the confidence to 'step up' and 'have a go'. You only wish to claim a small component of your travel expenses that you believe was of a direct benefit to your employment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Your travel expenses are not considered to have a sufficient connection to your employment duties to be incurred in the gaining or producing of your assessable income. The connection of these expenses to your subsequent increase in income is considered to be too remote. Your travel expenses are considered to be private in nature and therefore not an allowable deduction. | Detailed Reasoning - Detailed reasoning: 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. Travel expenses may be deductible where they form part of a taxpayer's self-education expenses. Taxation Ruling TR 98/9 states self-education expenses are allowable as a deduction 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. However, 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 (TR 98/9 paragraph 42). TR 98/9 also provides that if the 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, the self-education expenses are allowable as a deduction. Taxation Ruling IT 2198 deals with allowable deductions for voluntary expenditure incurred by employee taxpayers. Paragraph 13 states that the Taxation Boards of Review have seen a number of teachers seeking income tax deductions for overseas travelling expenses. Most of the claims were rejected because the teachers were not able to establish a positive connection between the overseas travel and the performance of their duties of employment as teachers. In the ultimate the claims have been based on a general proposition that the overseas travel has made the taxpayers better able to carry out their duties which, of itself, is not sufficient to enable the expenditure to be allowed as a deduction. In Case R47 84 ATC 380; (1984) 15 ATR 824, the taxpayer, a French language teacher, claimed a deduction for part of the expenses in travelling to France. The trip was not undertaken at the request of the taxpayer's employer. She asserted that the trip increased her teaching skills. The Board of Review stated 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. The expenditure was incurred in relation to a period during which the taxpayer was without obligation to render service to her employer. Notwithstanding that her experience would be of value when she resumed performing the duties of her employment, the essentially recreational nature of the journey did not alter. In Case U109 87 ATC 657, the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He undertook a 17 day trip to Indonesia organised by a natural museum history society of which he was a member. During the course of the trip he visited several volcanoes and other geological sites, and attended a geological congress. He also visited some tourist attractions. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return. The Administrative Appeals Tribunal (AAT) examined previous court decisions dealing with teachers who had claimed for the cost of overseas travel. It concluded that the trip was essentially recreational in character and not deductible. The AAT also stated that some taxpayers are fortunate in finding personal and recreational satisfaction in their field of endeavour and that in this case the trip was recreational in character and not deductible. The circumstances of your case can be compared to the above decisions. It is acknowledged that the travel would have broadened your knowledge and provided you with first hand experience that could be applied in your teaching. However, as with the cases quoted above, the courts have held that these reasons alone are not enough to demonstrate a sufficient connection between the travel and your income-producing activities. You have referred to Lenten v FC of T 2008 ATC 10-017; [2008] AATC 281 ( Lenten's case ) in your application. In Lenten's case the taxpayer was employed as an Assistant Principal of a Victorian high school. The taxpayer used unpaid leave to visit various places in Asia, Europe and the United Kingdom. The taxpayer was accompanied by his wife and visited mainly places of historical interest and significance through general package and self guided tours. Subsequent to the trip the taxpayer was appointed to the additional position of the Head of Studies of Society and the Environment (SOSE). This position involved the development of new and improved curriculum standards. The appointment of the additional position lead to an increase in income for the taxpayer. The Tribunal decided that 75% of the overseas travel expenses incurred by the applicant were deductible. The Tribunal was satisfied that the expenses not only directly contributed to his professional skill and knowledge, but also directly led to his advancement within the school as head of the SOSE faculty. The Tribunal decided that the dominant purpose of the travel was to improve the applicant's knowledge and skills as a teacher and to enhance his promotional opportunities at the school. The Tribunal also found that the travel enabled the applicant to support his colleagues in developing the curriculum mandated by the State government. It was also found that a minor element of the travel would have been of a recreational character, for which a 25% reduction was appropriate. The Commissioner has released a Decision Impact Statement for Lenten's case . The Tribunal considered elements such as the extent to which the taxpayer increased his knowledge as a result of the travel and whether that proved decisive in his subsequent career advancement. The Commissioner's view is that it was the Tribunal's acceptance of the taxpayer's dominant purpose of the travel that determined the outcome of this case. Your case can be distinguished from Lenten's case . Although you visited some cultural and historical sites, you and your family also visited numerous recreational tourist sites. You have stated that you only wish to claim a small portion of your travel expenses that you believe were of a direct benefit to your employment. The dominant purpose of your travel is considered to be recreational or private in nature. You have stated that your subsequent attainment of the additional leadership role would have been possible without your overseas travel. You state that it was the experiences gained from your travel that gave you the confidence to 'step up' and 'have a go' to apply for the position. This however, is not sufficient to provide an objective link between the travel expenses and the increase in your income. Unlike in Lenten's case, where the taxpayers additional duties included curriculum development linked to the areas of travel, your additional duties are more general in nature, including administrative and disciplinary duties. It is considered that the nexus between the travel expenses and the attainment of your additional role and increased income is too remote to allow a deduction. Many of the tours and places that you visited are common tourist attractions and are open to all to experience. The tours and school visits do not specifically relate to your teaching duties, nor did they directly lead to gaining the leadership position. The fact that your travel included visits to various schools does not change the nature of your expenses into work related expenses. The school visits may have provided you with teaching ideas and experience, however they do not relate to the earning of your assessable income as a teacher. While we acknowledge the cultural and social benefits, the knowledge to be gained from your travel is too general in nature for the expenses to be incurred in the course of gaining your assessable income. There are many experiences and places of interest which may help a teacher in their professional role; however, this does not mean that the associated expenses are automatically deductible. The purpose of your overseas travel was essentially recreational and private in nature. It is considered that there is not a sufficient connection between your travel expenses and your income earning activities. Accordingly, the costs you incurred in relation to your travel are not deductible under section 8-1 of the ITAA 1997.

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