Private ruling: Deductibility of overseas travel expenses
Published: April 2013
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Question and answer: | Are the overseas travel expenses you incurred deductible as work related expenses? | Yes.

Relevant facts and circumstances: You have been working in your chosen industry for many years. You took annual leave and travelled overseas to study businesses involved in your industry. You consider that taking your annual leave and travelling overseas on this type of study tour was considered mandatory at some stage in your career. Your employer arranged introductions to various business establishments overseas. The trip was for a period of X days and you incurred expenses including air fares, train fares, vehicle hire, accommodation, meals and incidentals. You consider that Y days of the trip were work related with the remaining days being of a private nature. You have calculated deductible expenses for Y work related days. You have invoices/receipts for the airfares, other transport expenses and accommodation expenses you wish to claim. You are claiming meal and incidental expenses according to Taxation Determination TD 2010/19 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2010-11 income year? You did not receive any financial assistance from your employer in regard to the expenses you wish to claim as a deduction. You kept a travel diary during your trip. The purpose of the trip was to increase your knowledge and expertise of the industry you work in and to increase your chances of promotion with your employer. Following the trip you gained employment with another company in a role that was a step up from your previous position. Within twelve months you gained another promotion which included an increase in salary. You consider that your overseas trip gave you a springboard to apply for the more senior position you now hold.

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

Reasons for decision: Summary: Section 8-1 of the 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 (TR 98/9) states at paragraphs 12 to 14: Self-education expenses are deductible under section 8-1 of the (ITAA 1997) where they have a relevant connection to the taxpayer's current income-earning activities. 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, the self-education expenses are allowable as a deduction. If 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 his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction TR 98/9 goes on to say at paragraph 23 that subject to the general tests under section 8-1 of the ITAA 1997 being met, airfares incurred on overseas study tours, sabbaticals or on work-related conferences or seminars are allowable as a deduction, as are the accommodation and meal expenses where the taxpayer is away from home overnight for that purpose. It is accepted that other transport and incidental expenses are also deductible on the same basis. In your case, you had been employed in your industry for many years when you undertook an overseas study tour relating to your industry. Following the trip you obtained employment at a higher level in your industry which also gave you a substantial increase in your salary. Consequently, it is accepted that the trip you undertook allowed you to continue to maintain and enhance the knowledge and skills that were required to perform your employment duties. Therefore, the expenses you incurred on your trip have the necessary and relevant connection with the earning of your assessable income and are deductible to the extent that the expenses are not private. You are entitled to deduct the overseas travel expenses you incurred in the relevant income year.