Edited version of private advice

Authorisation Number: 1051814503140

Date of advice: 17 March 2021

Ruling

Subject: Work related expenses - self education (travel)

Question 1

Are you entitled to a deduction for the airfare, taxi, accommodation, meals and incidental expenses you incurred in relation to your trip to City A?

Answer

Yes.

Question 2

Are you entitled to a deduction for the taxi, accommodation, meals and incidental expenses you incurred while in City B?

Answer

Yes.

Question 3

Are you entitled to a deduction for the taxi, accommodation, meals and incidental expenses you incurred in relation to your stopovers in City C when travelling to and from City B?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are employed as a lecturer at a university.

Your role responsibilities include conducting research and publishing.

You have undertaken two overseas trips.

Part of university's Strategic Plan is to establish links with other universities within Australia and outside. Your trips connect to this strategic plan.

You were not required to take any leave to undertake the trips because they were considered business travel.

You were not accompanied by anyone else on the trips.

City A

You travelled to City A to conduct research.

It was a common agreement with your employer that delivering professional development seminars would be beneficial.

You incurred expenses for flights, accommodation, taxi fares to airport and work, meals and incidentals.

City B

You travelled to City B to deliver workshops.

You received a grant from your employer.

You used the grant to pay for your flights and the hire of equipment for the workshop.

You stayed over in City C to and from City B because the flights were cheaper than having no layover. There were no work-related reasons to say in City C apart from saving money on the grant.

You incurred expenses for accommodation, meals, taxis and incidentals.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

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.

Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? states:

15. Determining whether a particular transport expense is incurred in gaining or producing assessable income will involve consideration of the proper scope of the particular employee's work activities to determine if the circumstances of the transport expense have a sufficiently close connection to earning the employment income. It is important to have regard not just to the duties in the contract of employment, but to the nature of the work as a matter of substance.

16. While transport expenses will only be deductible if they satisfy the requirements of section 8-1, the following factors (based on relevant case law) would support a characterisation of transport expenses as being incurred in gaining or producing assessable income:

•   the travel fits within the duties of employment, that is, the obligation to incur transport expenses arises out of the employment itself and not the employee's personal circumstances

•   the travel is relevant to the practical demands of carrying out the employee's work duties or role, that is, the transport expenses are a necessary consequence of the employee's income-producing activity.

17. In addition to the factors at paragraph 16 of this Ruling, the following factors (based on relevant case law) may also be relevant in determining whether a transport expense is incurred in gaining or producing assessable income:

•   the employer asks for the travel to be undertaken

•   the travel occurs on work time

•   the travel occurs when the employee is under the direction and control of the employer

Taxation Ruling TR 98/9 provides that transport, accommodation, meals and incidental expenses incurred on overseas study tours or sabbatical, on work related conferences or seminars or attending an educational institution are deductible under section 8-1 of the ITAA 1997. They are considered part of the necessary costs of participating in the tour or attending the conference or seminar or the educational institution.

TR 98/9 sets out the guidelines on the apportionment of expenses incurred where only part of the travel is work related. Where the private purpose is more than incidental to the business purpose the general rules to be used are set out in paragraphs 65 and 66 of TR 98/9:

65. Both Ronpibon Tin NL (78 CLR at 59; 8 ATD at 437) and Fletcher and Ors (173 CLR at 16; 91 ATC at 4957; 22 ATR at 621) recognise there are at least two kinds of expenditure that require apportionment under section 8-1. The first is expenditure in respect of a matter where distinct and severable parts are devoted to gaining income and other parts are devoted to some other end. If a study tour or work-related conference or seminar was mainly devoted to a private purpose, such as having a holiday, and the gaining or producing of income was merely incidental to the private purpose, only those expenses directly attributable to the income-earning purpose would be allowable.

66. The second kind of apportionable expenditure is a single outlay that serves both an income-earning purpose and some other purpose indifferently. While the High Court recognised that there can be no precise arithmetical division in such cases, it said there must be some fair and reasonable division on the facts of each case. For example, if a study tour or work-related conference or seminar is undertaken equally for income-earning purposes and private purposes, it would be appropriate to apportion the expenses equally between the purposes.

In your case, it is accepted that the relevant nexus exists between your income-earning activities and your trip to City A. Consequently, you are entitled to a deduction for the travel, accommodation, meals and incidental expenses incurred under section 8-1 of the ITAA 1997.

It is also accepted that the relevant nexus exists in relation to your trip to City B. Consequently, you are entitled to a deduction for the transport, accommodation meal and incidental expenses incurred while you were in City B. However, when travelling to and from City B you had extended stopovers in City C. The only reason for the extended stopovers was to save money on flights and there was no work-related reason for the time spent in City C. Consequently, the nexus with your income-producing activities is broken and the stopovers were private in nature. Therefore, you are not entitled to a deduction for the expenses you incurred during your stopovers in City C while travelling to and from City A.

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