Edited version of private ruling

Authorisation Number: 1011626715814

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Ruling

Subject: Overseas travel and other work-related expenses

Question 1

Can you claim a deduction for your overseas travel expenses?

Answer

No.

Question 2

Are you entitled to a deduction for travel insurance paid?

Answer

No.

Question 3

Are you entitled to a deduction for cost incurred in buying the gifts you took overseas?

Answer

No.

Question 4

Are you entitled to a deduction for cost incurred for vouchers purchased as an incentive for your students?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are a language teacher.

You travelled overseas during the school holidays.

The purpose of your trip was to foster an exchange programme between your school and the local schools overseas. You visited four local schools.

You provided a comprehensive account of your trip which involved going to the schools - taught English and Maths, talked about Australia, shared teaching methods with the teachers, interacted with the headmasters, teachers and students, and met with dignitaries, newspaper journalists and the evening news team.

You undertook some private sightseeing tours.

You discussed the exchange programme with the school board last year but they were not prepared to send their own students overseas.

You met a teacher from overseas who invited you to visit the school in her hometown and also organised for you to visit three other schools.

You decided that although it is not possible to take your own students overseas, you considered that it would benefit your school by bringing students from the local schools. You believed that it would help motivate your students in continuing to learn the language. You stated that you find it difficult to keep your own students interested and motivated.

The school board including the headmaster was encouraging of your trip. However, they did not pay for your travel expenses nor did they provide you with a travel allowance.

You took gifts which you personally paid for but the school endorsed the gifts as a token of goodwill between the schools.

You were accompanied by another language teacher from another school. You have only met with this teacher once before your trip and that was so you could check each other out before you went away together.

On your return, you brought a memorandum of understanding back to your school which is a legal binding document between the local schools and your own school. The school board was not prepared to sign this document.

You stated that although your trip was unsuccessful in setting up the sister school relationship, your language skills vastly improved and you also learnt a lot about the country your visited and the country itself as a different culture.

You are continuing to investigate how you and the other language teacher who accompanied you in your trip can circumvent the legalities surrounding the sister school programme.

At the school front, you are also faced with students resisting to learn languages.

You established a classroom incentive issuing tickets to any student who did not receive any disciplinary action. At the end of the term a ticket is drawn. The winning student receives a voucher. You wish to claim the cost in purchasing the vouchers as a work-related expense.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Question 1

Summary

It is considered that there is insufficient connection between your overseas trip and your current income-earning activities. Accordingly, the expenses associated with the overseas trip are not an allowable deduction.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except where the losses or 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 sabbatical, 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.

Taxation Ruling IT 2198 deals with allowable deductions for voluntary expenditure incurred by employee taxpayers. Paragraph 13 states that the Taxation Boards of Review have seen a number of teachers seeking income tax deductions for overseas travelling expenses. Most of the claims were rejected because the teachers were not able to establish a positive connection between the overseas travel and the performance of their duties of employment as teachers. In the ultimate the claims have been based on a general proposition that the overseas travel has made the taxpayers better able to carry out their duties which, of itself, is not sufficient to enable the expenditure to be allowed as a deduction

One particular case is Case U109 87 ATC 657. In this case, 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) concluded that the trip was essentially recreational in character and the expenses were not deductible. The AAT also 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 the expenses were not deductible.

In Case R94 84 ATC 628 a college librarian was disallowed overseas travel expenses in making a study tour of China organised by the Library Association. The benefits derived by the taxpayer might have made her a better librarian, but the nexus between the outgoings and deriving assessable income was too remote. The taxpayer voluntarily made the trip and the expenditure was essentially of a private nature.

In Case R47 84 ATC 380; (1984) 15 ATR 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 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 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. Although your employer encouraged you to travel overseas by endorsing the gifts you took to the schools, you have no obligations to render services for your employer.

It is acknowledged that the travel undertaken enabled you to have greater first hand knowledge, effectiveness and expertise in your areas of teaching thereby improving delivery of lessons and motivating your students, but it does not in itself mean that the expenditure was incurred in gaining or producing assessable income.  As with the cases quoted above, the courts have held that these reasons alone are not enough to demonstrate a sufficient connection between the travel and your income-producing activities.

With excursions and school camps, generally, a teacher is allowed a deduction for expenses they incur when accompanying students on excursions or trips where the trip is relevant to the teacher's employment. To be relevant to the teacher's employment, the trip should be part of the school's curriculum or syllabus of the school. A supervisory role by itself is not sufficient to make the expenses deductible.

An example provided in Taxation Ruling TR 95/14 is where a teacher accompanies students to visit a sister school overseas. Attendance of the trip is open to any student of the school. While on the trip, 6 out of the 10 days are spent engaging in social, classroom and sporting activities. The remaining days are spent touring the country. In this case, the trip does not form part of the school's curriculum as the trip is open to all students. Even though the trip may provide social and cultural benefits to the students, the teacher's expenses are not deductible.

Although your trip was not to accompany students in an excursion or school camp, the principles are the same in that a sufficient connection must be established between your overseas trip and your income-producing activities. It is not considered that your trip has a direct relevance to the school's curriculum. Therefore, there is insufficient connection between your overseas trip and your duties of employment as a language teacher. Accordingly, the airfares and accommodation you incurred in respect of your overseas trip are not deductible under section 8-1 of the ITAA 1997.

Question 2

Travel insurance

The Administrative Appeals Tribunal held in Case T78 86 ATC 1094 that the cost of travel insurance is private in nature, as the policy generally covers illness, loss of baggage, and theft or damage to belongings, which are expenses that are essentially private in nature.

Therefore, no deduction is allowable for the cost of travel insurance under section 8-1 of the ITAA 1997.

It should be noted that even if you had been entitled to a deduction for self-education expenses, no deduction for the cost of your travel insurance would be available as they are considered private in nature.

Question 3

Gifts

Gifts are ordinarily not deductible under section 8-1 of the ITAA 1997 as they are generally considered to be private in nature. However, a deduction may be allowable where a gift is made in carrying out employment duties or for business purposes and there is no private motivation (paragraph 154 of Taxation Ruling TR 1999/10).

In your case, it may be customary for gifts to be presented when visiting schools overseas. However, your overseas trip as discussed in Question 1 is considered to be private in nature and therefore purchasing the gifts were not carried out as part of your official duties. Accordingly, a deduction is not allowed for the costs incurred in purchasing these gifts.

Question 4

Teaching aids

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 in TR 95/14 include prizes purchased to reward achievement and encourage students.

In your case, you purchased vouchers for your students as an incentive for good behaviour. Accordingly, the costs incurred for any purchased resource are deductible to the extent they are used in your teaching activities. 

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