Edited version of private ruling

Authorisation Number: 1011549609700

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Ruling

Subject: Overseas travel expenses

Are you entitled to a deduction for overseas travel expenses?

No.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commences on:

1 July 2008

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a language and culture teacher.

You travelled overseas to gather and share resources at educational institutions where you worked in the past.

You also visited friends and family while you were overseas.

You were accompanied by your spouse.

Your employer encouraged you to travel overseas by approving your leave without pay. However, your employer did not make any financial contributions towards your trip.

Your visits to the educational institutions were not organised before you left overseas.

You did not attend any language courses whilst overseas.

On your return, you shared your knowledge with your students by showing them souvenir items you brought back from overseas. You also shared stories about your trip with your students.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

You are not entitled to a deduction for your overseas travel expenses as there is insufficient connection to your income-earning activities.

Detailed reasoning

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.

The deductibility of your overseas travel needs to be considered under general self-education principles outlined in Taxation Ruling TR 98/9. In accordance with TR 98/9, expenses of self-education are allowable 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.

TR 98/9 explains that expenses incurred on overseas study tours or sabbaticals, on work-related conferences or seminars, or attending an educational institution are deductible if the necessary connection with a person's income-earning activity exists. However, the ruling also explains that if the subject of the self-education is too general in terms of the taxpayer's income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist.

In Case R47 84 ATC 380; (1984) 27 CTBR (NS) Case 101, 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 Taxation 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 Case Q83 83 ATC 418; (1983) 27 CTBR (NS) Case 11, 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 a 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 transform tourist activities into business activities.

In Case U 109 87 ATC 657, the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He undertook a 17 day trip to Indonesia organised by a natural museum history society of which he was a member. During the course of the trip he visited several volcanoes and other geological sites, and attended a geological congress. He also visited some tourist attractions. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return.

The Administrative Appeals Tribunal (AAT) examined previous court decisions dealing with teachers who had claimed for the cost of overseas travel. It concluded that although the taxpayer may have been a better teacher because of the travel, this fell short of the sufficient connection required between the travel and their income-earning activities. The AAT stated that some taxpayers are fortunate in finding personal and recreational satisfaction in their field of endeavour and that in this case the trip was recreational in character and not deductible.

In your case, the circumstances of your overseas travel are similar to travel undertaken in the cases noted above, in that you have voluntarily undertaken the trip overseas. Although your employer encouraged you to travel overseas by approving your leave without pay, you have no obligations to render services for your employer.

While we acknowledge the incidental purpose of your trip is to develop your language skills and engage in cultural experiences, the knowledge you gained is too general in nature. The value of your experiences in relation to your employment duties does not alter the essentially private nature of the trip.

Although this trip may have broadened your teaching skills and knowledge, the courts have held that these reasons alone are not enough to demonstrate a sufficient connection between the overseas travel and your income-earning activities.

Therefore, your trip is not considered to have a sufficient connection to your employment duties, and you are not entitled to a deduction for the overseas travel expenses you incurred for your trip.

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