ATO Interpretative Decision
ATO ID 2002/208
Income TaxDeductibility of visa expenses - temporary business visa to remain in Australia
FOI status: may be released
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Status of this decision: Decision Current
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Is a taxpayer entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in applying for a visa to remain in Australia?
No. The taxpayer is not entitled to claim a deduction under section 8-1 of the ITAA 1997 for expenses incurred in applying for a visa to remain in Australia because the expense was not incurred in gaining or producing assessable income.
The taxpayer arrived and remained legally in Australia on a visa.
The visa was conditional that certain requirements were met.
The taxpayer's circumstances changed and the conditions on the visa were not satisfied.
The taxpayers options were to:
- leave Australia; or
- seek another visa to remain in Australia.
Soon after arrival in Australia the taxpayer commenced employment as an employee. The employer agreed to sponsor the taxpayer by providing employment for the taxpayer to stay in Australia as a prerequisite to a further visa application.
The taxpayer sought to remain in Australia and was successful in obtaining a temporary business visa from the Department of Immigration and Multicultural Affairs.
The taxpayer incurred expenses (legal expenses, labour market testing, medical certificate, etc) in obtaining the temporary business visa.
Reasons for Decision
Section 8-1 of the ITAA 1997 broadly allows a deduction for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent outgoings are of a capital, private or domestic nature.
The courts have considered the meaning of 'incurred in gaining or producing the assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that
'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.'
The expenditure must therefore be related to the production of assessable income. The purpose of obtaining the temporary business visa was to allow the taxpayer to live in Australia rather than earn assessable income as an employee.
Alternatively, the cost of making application for a temporary business visa is considered private in nature and not deductible under section 8-1 of the ITAA 1997 because the purpose for applying for a temporary business visa was for the taxpayer to remain legally in Australia.
Accordingly, the expenses for applying for the temporary business visa are not deductible under section 8-1 of the ITAA 1997 because they were not incurred in gaining or producing assessable income and are also private in nature.Date of decision: 5 October 2001
Year of income: Year ended 30 June 2001
Income Tax Assessment Act 1997
Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation
78 CLR 47
56 ALR 785
8 ATD 431
Deductions & expenses
Work related expenses