Edited version of your written advice

Authorisation Number: 1051228642252

Date of advice: 23 May 2017

Ruling

Subject: Travel Expenses for spouse

Question 1

Are the costs of airfares, meals and accommodation incurred for your spouse when accompanying you on work related travel deductible?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You are a self-employed consultant. You undertake domestic and international consulting assignments when your health allows.

You developed an illness which has left you with a medical condition. You have limited use of your hands.

Your spouse provides assistance with your dressing, toileting and personal hygiene needs.

When travelling for work your spouse assists you with the specific work and personal tasks.

You do not have an employment contract or agreement with your spouse and you do not pay your spouse any form of remuneration.

You will incur costs for your spouse's airfares, meals and accommodation.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1,

Income Tax Assessment Act 1997 section 26-30,

Income Tax Assessment Act 1997 subsection 26-30(1) and

Income Tax Assessment Act 1997 subsection 26-30(2).

Reasons for decision

We must consider two things to determine if you are eligible to deduct the expenses incurred by your spouse as they accompany you on your work related travel. The first being the nature of the tasks your spouse undertakes in assisting you and how these are considered in relation to the derivation of your income.

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. Generally, expenses directly related to the taxpayer's personal circumstances (their health) are characterised as being private or domestic in nature.

In WTPG v Commissioner of Taxation [2016] AATA 971 (WTPG's case), the taxpayer needed a carer to assist him in performing a number of daily tasks such as walking, showering, using the toilet and dressing. In the 2013-14 income year, he paid for his wife's 'travel costs' (but didn't otherwise pay her) to travel with him to the UK so that she could be his personal carer, while he attended 2 work-related conferences. The taxpayer's employer met all his travel expenses. The AAT concluded that the taxpayer could not have attended the conferences and meetings in the United Kingdom had he not been accompanied by a person who could assist him with standing and walking, using the toilet, showering and bathing and dressing. The AAT further stated that the taxpayer incurred those expenses in the course of enabling him to undertake his duties rather than in the course of his undertaking those duties. The taxpayer is not remunerated by his employer for the efforts he makes to put himself in a position where he can undertake the duties but to undertake the duties of his employment. As such it is considered that these duties were of a private or capital nature as opposed to an income producing nature.

In Frisch v. Commissioner of Taxation [2008] AATA 462; 2008 ATC 10-031; 72 ATR 551 (Frisch's case), the taxpayer employed and paid an assistant to type, write notes and memos, to retrieve, move and open files, to photocopy documents as well as provide some personal care. The AAT held that the portion of the expenditure that related to the non-personal services was an expense incurred in order to enable the taxpayer to carry out her duties and incurred in the derivation of the relevant income. However, the AAT also concluded that the portion of the expenditure that related to the provision of personal care was not deductible as it was private in nature. The AAT went on to say that an expense to overcome a physical disability in most cases would probably be non-deductible as private or domestic. The AAT elaborated by saying that a service only required and provided at work may be an exception but that a service required both at home and at work would be non-deductible.

Your case shares similarities with both WTPG's case and Frisch's case in that the tasks your spouse undertakes to assist you have elements of both personal care services, being private in nature and non-deductible, and non-personal services, being income producing in nature.

Having established the nature of the tasks performed by your spouse we must also consider the second factor being the capacity in which your spouse accompanied you on your travel.

Section 26-30 of the ITAA prevents a deduction (and therefore over-rides section 8-1 to the extent a deduction could have been claimed under that section) in respect of expenditure attributable to relatives who accompany you when you travel in the course of producing your income. However if the relative accompanying you performs substantial duties as either your employee or your employer's employee, and it is reasonable to conclude that your relative would have accompanied you, even if she did not have a personal relationship with you, then the travel expense in question will be deductible.

The relevant provision is as follows:

26-30(1)

You cannot deduct under this Act a loss or outgoing you incur, insofar as it is attributable to your *relative's travel, if:

(a) you travelled in the course of performing your duties as an employee, or in the course of carrying on a *business for the purpose of gaining or producing your assessable income; and

(b) your relative accompanied you while you travelled.

Exception to subsection (1)

26-30(2)

Subsection (1) does not stop you deducting a loss or outgoing if:

(a) your *relative, while accompanying you, performed substantial duties as your employer's employee, or as your employee; and

(b) it is reasonable to conclude that your relative would still have accompanied you even if he or she had not had a personal relationship with you.

The term 'employee' is not defined under the ITAA 1997, and in absence of a statutory definition, the term takes on its ordinary meaning. The Concise Oxford English Dictionary, 9^th edn, Oxford University Press, Melbourne defines 'employee' as a person employed for wages or salary.

As you do not have an employment agreement with your spouse or pay your spouse a wage or salary it can be concluded that while you may satisfy the paragraph (b) exception, you do not satisfy the exception in paragraph (a) as your spouse does not perform their non personal duties as either your or your employer's employee.

As your spouse does not fall within the definition of an 'employee' nor your employer's employee, you do not satisfy the exception under section 26-30 of the ITAA 1997 and therefore, the travelling expenses incurred by you having your spouse voluntarily accompany you will not be allowed.

Other references (non ATO view)

WTPG v Commissioner of Taxation [2016] AATA 971

Frisch v. Commissioner of Taxation [2008] AATA 462; 2008 ATC 10-031; 72 ATR 551

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