Private ruling: Work related expenses
Date of advice: 22 June 2015
Published: June 2015
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Are the costs incurred for travel to and from work considered to be a deductible expense? | A1: No. | Q2: Are the costs incurred for meals at work considered to be a deductible expense? | A2: No. | Q3: Are the costs incurred for a degree in tourism and hospitality considered to be a deductible expense? | A3: No.

Relevant facts and circumstances: You are an international student on a student visa. You are an Australian resident for tax purposes. You commenced studying for a bachelor degree in tourism and hospitality. The course duration is four years and you are studying full-time. You are currently employed part-time as a manager. You have been in your current employment since 20XX. Your previous employment was as a part-time bar supervisor. You received a letter from the Tax Office requesting you review your work related expenses and to amend them if you consider you have submitted any incorrect claims. Your claim for work related travel expenses was for travelling to and from work by public transport or taxi. Your claim for 'Other' work related expenses was for lunches and snacks purchased to be eaten at work during normal hours, meaning you were not on overtime or receive an overtime meal allowance. Your claim for self-education expenses relate to your bachelor in tourism and hospitality.

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

Reasons for decision: Detailed Reasoning - Work Related Expenses: Work-related expenses generally fall for consideration under Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for all losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are capital, or are of a capital, private or domestic nature. A deduction is allowable if a taxpayer can show that: • the expense was actually incurred • the expense meets the deductibility tests • they have satisfied any applicable substantiation rules. | Detailed Reasoning - Travel expenses: Generally a deduction is not allowable for the cost of travel between home and work as it is considered a private expense. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. Such expenses are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction ( Lunney's case and Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616). The essentially private character of travel between home and work is not affected by factors such as the mode of transport, the availability of transport, the lack of suitable public transport, the erratic times of employment, the time of travel, the distance of travel and the necessity of travel (Taxation Ruling IT 2543). | Detailed Reasoning - Application to your circumstances: In your case, you have claimed the costs of travel by either public transport, or taxi to or from your place of employment. This is considered a private expense, and therefore is not an allowable deduction. | Detailed Reasoning - 'Other' expenses - meals at work: Any other work-related expenses that you incurred as an employee and which you may claim include: • work related telephone expenses • union fees and subscriptions to trade business or professional associations • overtime meal expenses • professional seminars, courses, conference and workshops • reference books, technical journals and trade magazines • tools and equipment and professional libraries • items that protect you from the risk of injury or illness posed by your work or your work environment • costs in relation to a computer including the decline in value, repair costs and interest on money borrowed to buy the computer • home office expenses. | Detailed Reasoning - Application to your circumstances: In your case, you have claimed the costs of lunches and snacks bought for the purpose of eating at work during what is considered to be normal hours of work, rather than a meal bought whilst you were working overtime. You did not receive an overtime meal allowance from your employer. Consequently, the cost of meals and snacks you consumed at work is considered a private expense, and therefore is not an allowable deduction. | Detailed Reasoning - Self-education expenses: The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses . In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of ITAA 1997 if: • a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge, and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge ( FC of T v. Finn (1961) 106 CLR 60;(1961 12 ATD 348) (Finn's Case); or • the study of a subject of self-education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from their current income earning activities in the future (FC of T v. Hatchett (1971) 125 CLR 494; 71ATC 4184; (1971) 2ATR 557 (Hatchett's Case). Therefore, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses. However, self-education expenses will not be deductible if the study is intended to: • enable you to get employment, • enable you to obtain new employment, or • to open up a new income-earning activity (whether in business or in your current employment). Paragraph 48 of TR 98/9 refers to the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 ( Maddalena's Case ). That case established that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. The expenses would be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. | Detailed Reasoning - Application to your circumstances: In your case, you are studying for your bachelor in tourism and hospitality and have been employed in Australia as a part-time bar supervisor and later, as a part-time manager. It is considered that there is insufficient connection between your self-education expenses in tourism and hospitality and your part-time income earning activities as a part-time bar supervisor and as a part time manager. The course cannot be said to have been undertaken to improve or maintain a specific skill or knowledge in a current income earning capacity, as the study provides you with skills far in advance of those that you need in your current occupation. The essential character of the expenses is that they were incurred to enable you to complete the course of education and earn assessable income from your future employment in the tourism and hospitality industry. The self-education expenses are considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Accordingly, your self-education expenses are not allowable deductions.