Private ruling: Deduction-overseas travel
Published: November 2011
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you entitled to claim a deduction for your overseas travel expenses? | A1:  | Q2: Are you entitled to claim a deduction for travel expenses incurred in relation to your family accompanying you to country A? | A2:  | Q3: Are you entitled to claim a deduction for the cost of educational resources purchased while you were in country A? | A3: 


Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1. Income Tax Assessment Act 1997 section 26-30

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. The deductibility of your overseas travel is considered under section 8-1 of the ITAA 1997. To satisfy section 8-1 of the ITAA 1997, the loss or outgoing must be relevant and incidental to the operations or activities from which the assessable income is produced: Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; (1949) 4 AITR 326. This principle is also expressed in terms of there having to be a sufficient nexus or connection between the outgoing and the production of assessable income. What is involved is a process of identifying the essential character of the expenditure to determine whether it is in reality an outgoing incurred in gaining or producing assessable income. The courts have seen a number of cases where taxpayers sought income tax deductions for overseas travel expenses. Most of the claims were rejected because the taxpayers were not able to establish a sufficient nexus between the overseas travel expenses and their assessable income. In the Board of Review Case R47 84 ATC 380; (1984) 15ATR 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 another Case Q83 83 ATC 418, the taxpayer, a high school French and Indonesian language teacher, travelled overseas with her husband. She claimed a deduction for travel expenses relating to time spent in France and Indonesia. The taxpayer conceded that promotion did not depend on travelling overseas. The Taxation Board of Review disallowed the taxpayer's claim. They found that even though language teachers can, in the course of ordinary tourist activities, derive benefits as teachers, this fact does not transmute tourist activities into business activities. In your case, you are employed as an educator and travelled to country A for the purpose of preparing an assessment report for a future trip. A review of the itinerary provided and the circumstances surrounding your travel to country A support the view that the character of the expenditure is arguably of a private nature for the following reasons: · your employer did not specifically request that you undertake the trip to country A · it was not a requirement of your duties to undertake this trip · you were not required to undertake any specific tasks for your employer while in country A · your employer had not provided any financial support to you for undertaking the trip to country A · you did not undertake any specific courses or attend any seminars in relation to your profession to assist in maintaining or improving your skills nor was there any indication that you arranged any special meetings with any education facilities or other educators prior to departing Australia to travel overseas. · you and your family travelled to country A during the holidays and visited a number of places of interest including amusement parks, temples, shopping centres, national parks, museums and restaurants, all of which are considered tourist or recreational activities. While you made various arrangements in regards to the future trip we consider these to be incidental activities. You also contend that as a result of the trip it enhanced your skills to prepare for your role in relation to a future trip to country A. We acknowledge that your trip may have better prepared you for a future trip to country A. However, this is not sufficient to transform the character of the travel expenses from private to work related in nature. The circumstances of your travel are similar to the travel undertaken in the Taxation Board of Review cases noted above, in that you voluntarily undertook the trip without any financial support or specific tasks to undertake for your employer. Furthermore, there is no evidence to indicate it was a condition of your employment to undertake this specific trip to country A. Given the factors noted above, your trip is considered to be predominantly private in nature and as such no deduction can be claimed for your travel expenses. There is insufficient connection between the outgoings incurred and the gaining of your assessable income. Therefore a deduction for the expenses noted above is not available under section 8-1 of the ITAA 1997. | Detailed Reasoning - Travel expenses incurred in relation to your family: Section 26-30 of the ITAA 1997 prevents a deduction for expenses attributable to the travel of a relative where the relative simply accompanies you while you travel. However, if the relative accompanying you, performs substantial duties as your employer's employee or as your employee, and it is reasonable to conclude that your relative will still accompany you, even if he or she does not have a personal relationship with you, then the expenses will be deductible. In your case, your partner is not an employee of your employer or your employee. Your partner was not required to undertake any duties for your employer on this trip to country A. In addition the purpose of your child accompanying you was because your child could not be left on their own as you were the primary care giver. The expenses associated with your family accompanying you to country A are not deductible as they are private in nature. | Detailed Reasoning - Educational Resources: The deductibility of work related expenses for teachers is discussed in Taxation Ruling TR 95/14. Paragraph 205 of the ruling specifies that teaching aids purchased by teachers to be used in the course of carrying out their duties of employment are deductible to the extent they are not private, domestic or capital in nature. The items purchased must have a direct and relevant use in carrying out those duties. Examples of teaching aids include stationery, books and items used to conduct classes. Accordingly, any books or items used to conduct classes are deductible to the extent they are used in your teaching activities.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are employed as an educator at an education facility. | The education facility has an exchange program with country A. | In the past, previous educators have travelled to country A as part of the exchange program. | Part of your employment arrangement was to arrange travel to country A. | You travelled to country A during a scheduled holiday break with your partner and your child. | The purpose of the trip was to undertake an assessment to ensure the safety of the people who intended to travel to country A in the future. | Your employer did not request you to travel to country A to undertake a formal assessment of the proposed trip to country A. | You did not provide a copy of the assessment report to your employer in relation to the trip to country A. | You did not organise any visits or meetings prior to travelling to country A. | You did not receive any allowances or reimbursements for the expenses paid in relation to the trip to country A. | You did not attend any conferences or seminar while in country A. | Your partner's reason for travelling to country A was that he would be a supervisor on a future trip to country A. | Your partner was not required to undertaken any duties for your employer while in country A. | You could not leave your child in Australia as you are the primary care giver. | You are seeking to claim a deduction for travel expenses for you and your family and a number of educational resources.