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Edited version of private ruling

Authorisation Number: 1011542518753

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Ruling

Subject: Deduction: clothing, footwear and trekking equipment

1. Are you entitled to a deduction for the costs of clothing and footwear that you incurred for a school trekking trip?

No.

2. Are you entitled to a deduction for the costs of a trekking equipment that you incurred for a school trekking trip?

No.

3. Are you entitled to a deduction for car expenses incurred in travelling between home and a training location to supervise training for a school trekking trip?

No.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commences on:

1 July 2009

Relevant facts and circumstances

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

You are a teacher at an education facility.

Trekking duties are not part of your normal duties.

You have attended other school camping and sporting activities.

You are travelling to overseas to undertake a trekking expedition.

The purpose of the expedition is to develop the leadership skills of the students and to teach the students about different cultures.

The following activities are undertaken relation to the trekking expedition:

The students are required to keep a journal in relation to the trip. The students are not assessed on this journal.

The trekking expedition is not part of the school curriculum.

The trekking expedition was open to secondary students.

This is the first trekking expedition undertaken by you and as a result you have incurred expenses for specialised trekking equipment.

You are not required to pay the costs for the expedition except those for the clothing, footwear and trekking equipment.

In preparation for the trekking expedition you and the students have undertaken training walks.

You used your car to travel between your main residence and a training location to supervise training walks.

Reasons for Decision

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.

To satisfy the first limb of 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 N.L.Tongkah Compound N.L. v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236. 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. The occasions of the loss or outgoing should be found in whatever is productive of the assessable income or, if no assessable income is produced, what would have been expected to produce 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.

Taxation Ruling TR 95/14 (TR 95/14) provides the Commissioner's view on the deductibility of common work-related expenses incurred by employee teachers. TR 95/14 states:

Some factors that would determine the relevance of the trip to the teacher's employment include:

The purpose of the trip and the activities undertaken should have an educational benefit and be related to the curriculum of the school. It would also be expected that the employee teacher participates in the task of supervising students while on such a trip. If the trip does not have a direct connection to the syllabus of the school, an employee teacher's supervisory role would not be sufficient to make the expenses deductible.

The relevance to the school curriculum is an important factor in determining the character of such trips. However, there are occasions where the reason for the trip and the activities undertaken will not be curriculum-related but may be an integral part of the extra-curricular activities of the school and therefore a deduction for the trip may not necessarily be denied. Such trips may include school related sporting events, tours conducted by school bands and attending to school related competitions.

There may be occasions where trips overseas may be approved by the school and the opportunity to go on these trips provide social and cultural benefits to the students and employee teachers. However, these factors alone do not suffice to make the expenses in relation to the trip deductible. The deductibility of the expenses incurred in undertaking an excursion, school trip or camp will depend on the specific circumstances.

In your case, you are supervising a group of students to undertaken a trekking expedition. From the information provided the trekking expedition is open to a range of secondary students. The trekking expedition is not directly related to any specific subject under the curriculum or syllabus of the school. The purpose of the trip would indicate the trekking expedition will provide social and cultural benefits to the students and you as an employee of the school. All these factors would indicate that any expenses incurred on the trip would not have sufficient connection to your gaining or producing your assessable income in your current employment.

Further TR 95/14 indicate a deduction is allowable for the cost of buying, hiring or replacing clothing, uniforms or footwear ('clothing') if these items are either:

In regards to protective clothing paragraphs 45 and 46 of TR 95/14 states:

A deduction is not allowable for the cost of conventional footwear such as running shoes, sports shoes, walking shoes and casual shoes, as it is not considered to be protective. We consider that the cost of this footwear is a private expense and is not an allowable deduction.

In addition paragraph 47 of that ruling also states that a deduction is not allowable for the cost of items that provide protection from the natural environment. The cost of these items is considered to be a private expense.

In your case, the clothing and footwear purchased are not considered protective, occupation specific, compulsory or non-compulsory as conventional clothing can be described as 'ordinary' clothing of a type usually worn by men and women regardless of their occupation.

The purchasing of clothing and footwear for trekking are items of clothing and footwear commonly worn in these regions. They are the most appropriate items to wear to provide protection from the natural environment. It is considered that clothing and footwear do not have the essential character of an outgoing incurred in gaining assessable income. Therefore, a deduction is not allowed under section 8-1 of the ITAA 1997 for the cost of clothing and footwear.

Trekking equipment

A deduction is allowable under section 8-1 of the ITAA 1997 for the cost of teaching aids to the extent they are used for work-related purposes.

You purchased trekking equipment to use on the trekking expedition. The equipment is not considered the type of equipment that is usually associated with every day duties of a teacher such as pens, stationery, books, brief case, whistle or stop watches, calculator and other teaching aids.

Therefore, no deduction is available under section 8-1 of the ITAA 1997.

Section 40-25 of the ITAA 1997 allows a deduction for the decline in value of assets which are used to produce assessable income, or were installed ready for that purpose. Thus, a deduction will only be allowable where a nexus exists between the use of the asset and how a taxpayer derives their assessable income. However, a deduction for the decline in value of a depreciating asset is not allowable if the depreciating asset is used solely for private purposes.

In your case, you are employed as a teacher. Although you are required to co-ordinate and participate in the extra curriculum activities in the school, it is considered the trekking equipment does not have sufficient nexus to your income earning activities as a teacher and any use of this equipment is considered private in nature.

Therefore, a deduction for the decline in value of the trekking equipment is not available under section 40-25 of the ITAA 1997.

Car expenses

In cases where a deduction is allowed for employee teacher accompanying students on excursions, educational and sporting trips and camps in the course of gaining or producing assessable income, expenses incurred prior to an employee teacher attending excursions, educational and sporting trips and camps may be an allowable deduction.

In your case, you incurred car expenses in travelling to training exercises to cope with the trekking prior to attending the trekking expedition. The car expenses incurred prior to the trekking expedition do not have sufficient connection to your current employment. Therefore, no deduction is available under section 8-1 of the ITAA 1997 or Division 28 of the ITAA 1997 for the car expenses.

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