ATO Interpretative Decision
ATO ID 2001/416 (Withdrawn)
Income Tax
Deduction - Overseas Travel to Manufacture DesignsFOI status: may be released
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This ATO ID is a straightforward application of the law and does not contain an interpretative decision.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Are travel expenses incurred by a taxpayer in taking designs overseas to be manufactured an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. Travel expenses incurred by a taxpayer in taking designs overseas to be manufactured are an allowable deduction under section 8-1 of the ITAA 1997.
Facts
The taxpayer is a freelance designer. The taxpayer's manufactured designs are currently sold in gift shops throughout the taxpayer's home city. The designs are currently manufactured in Australia. The taxpayer intends to incur expenses travelling to a foreign country in order to arrange for the designs to be manufactured in that foreign country and brought back to Australia for sale. The taxpayer wishes to claim a deduction for the travel expenses.
Reasons for Decision
Whether or not the expenses the taxpayer incurs in travelling overseas to have designs manufactured is governed by section 8-1 of the ITAA 1997.
To be deductible under subsection 8-1(1), a loss or outgoing must be relevant or incidental to gaining or producing assessable income. Alternatively, it must be part of the cost of carrying on a business in order to produce assessable income. To be deductible under this subsection, a loss or outgoing must have the essential character of a business or income-producing expense.
In this case, the taxpayer currently designs products which are then manufactured in Australia for sale. The taxpayer is planning to send designs overseas to be manufactured and then brought back to Australia for re-sale. The essential character of the expenditure is that of a loss or outgoing incurred in the gaining or production of assessable income. The taxpayer is not looking at opening new markets as there is already an established market, therefore, the expenditure could not be characterised as being capital in nature.
The travel expenses that are incurred in taking the designs overseas to the manufacturer would, therefore, be deductible.
Date of decision: 18 September 2001
Legislative References:
Income Tax Assessment Act 1997
section 8-1
subsection 8-1(1)
Keywords
Overseas travel expenses
ISSN: 1445-2782
| Date: | Version: | |
| 18 September 2001 | Original statement | |
| You are here | 1 April 2010 | Archived |