ATO Interpretative Decision
ATO ID 2001/415
Income Tax
Travel Expenses to Inspect Trust PropertyFOI status: may be released
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a trust entitled to claim a deduction for travel expenses incurred by the trustee to inspect the premises of a company of which the trust is a shareholder?
Decision
No, the expenses are not deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as they are not incurred in relation to the gaining or producing of assessable income.
Facts
The trust owned shares in a company as a long term investor. The company organised an educational tour to one of its facilities for its shareholders to inspect. The trustee and a beneficiary of the trust accepted the offer. The expenses incurred included travel costs, travel insurance and taxi fares. The trust was a small shareholder of the company.
Reasons for Decision
For an expense to be an allowable deduction it must be incurred in gaining or producing assessable income in accordance with section 8-1 of the ITAA 1997.
Although the trust is entitled to receive dividends in respect of the shares that it owns, the amount of dividends that the trust will receive from its shareholding will neither increase nor decrease as a result of the trustee undertaking the inspection trip.
Therefore, it is not possible to establish a connection between the dividends included in the assessable income of the trust and the travel expenses incurred. Furthermore, it is not possible to establish a connection between the travel expenses and the share value of the shares that the trust holds
As it is not possible to establish a connection between the travel expenses incurred and the assessable income gained from the shares, the travel expenses are not an allowable deduction under section 8-1 of the ITAA 1997.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 25 November 2016 | Reasons for Decision | Inserted a comma in the second paragraph. |
Legislative References:
Income Tax Assessment Act 1997
section 8-1
Keywords
Travel expenses
Deductions & expenses
Shares
Shareholders
Date reviewed: 18 November 2016
ISSN: 1445-2782
| Date: | Version: | |
| 5 September 2001 | Original statement | |
| You are here | 25 November 2016 | Updated statement |