Edited version of private ruling

Authorisation Number: 1011476495234

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Ruling

Subject: Self-education expenses - overseas travel

Question

Are you entitled to claim a deduction for work related travel expenses for a trip to country A?

No.

This ruling applies for the following periods

Year ended 30 June 2009

The scheme commenced on

1 July 2008

Relevant facts

You are a teacher.

You are employed as a teacher, as well as being a pastoral co-ordinator.

You are the co-ordinator of an award.

You travelled to country A for four weeks with other teachers.

The purpose of the trip was to experience the challenges of the mountains and the culture of country A.

The trip primarily involved activities.

The trek provided experience in many new aspects of organisation and skills associated with the relevant Award.

You spent time learning about altitude acclimatisation and the effects of altitude sickness which is an integral part of the specified course.

You attended a lecture.

You collected resources for the college.

Since returning to the college you have presented lectures focusing on cultural differences and geological makeup of the area you visited.

You donated stationery and supplies that had been donated by the college to a boarding school.

You travelled in the school holidays.

Your employer did not direct you to go and did not pay any expenses associated with the trip.

You incurred air fare expenses and tour of base camp fees.

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, relate to the earning of exempt income or are excluded by another provision of the taxation legislation.

Most self-education expenses are incurred voluntarily and to be allowable under section 8-1 of the ITAA 1997, the expenditure must be characterised as having been incurred in gaining or producing assessable income (Fletcher & Ors v. Federal Commissioner of Taxation T 91 ATC 4950 at 4957).  Ronpibon Tin N. L v. Federal Commissioner of Taxation (1949) 78 CLR 47 Dixon J at p56 indicated that the character of the expenditure is relevant and incidental to the gaining or producing of assessable income.

The Commissioner's view on the deductibility of employee teachers' work related expenses is set out in Taxation Ruling TR 95/14. This Ruling applies to employee teachers, tutors, early childhood, primary, secondary, special education, technical and further education and relief employee teachers. 

Paragraph 188 of TR 95/14 states that:

"(a) A deduction is allowable for self-education expenses if the education is directly relevant to the taxpayers current income-earning activities. This particularly applies if a taxpayer's income-earning activities are based on skill/knowledge and the education enables him or her to maintain or improve that skill/knowledge.

A deduction is allowable if the education is likely to lead to an increase in the taxpayer's income from his or her current income-earning activities.

A deduction is not allowable if the education is designed to enable a taxpayer to get employment, to obtain new employment or to open up a new income-producing activity (Federal Commissioner of Taxation v. Maddalena 71 ATC 4161; 2 ATR 541).

Self-education includes courses undertaken at an educational institution (whether leading to a formal qualification or not), attendance at work-related conferences or seminars, self-paced learning and study tours.

Self-education expenses include fees, travel expenses (e.g., attending a conference interstate), transport costs, books and equipment."

The deductibility of your overseas travel needs to be considered under general self-education principles and relevant case law.

Taxation Ruling TR 98/9 provides the Commissioner's view on the deductibility of self-education expenses. It states that self-education expenses are incurred in gaining or producing assessable income if they are directly relevant to the person's employment activities or are likely to lead to an increase in income from those activities.

TR 98/9 explains that airfares, accommodation and meal expenses incurred on overseas study tours or sabbaticals, on work-related conferences or seminars, or attending an educational institution are deductible if the necessary connection with a persons income producing activity exists.

However, TR 98/9 explains that if the subject of the self-education is too general in terms of the taxpayers income-earning activities, the necessary connection between the expense and the income-earning activity does not exist.

The ruling also states that the intention or purpose in incurring an expense can be an element in determining whether the whole or part of the expense is an allowable deduction.  

The leading case for expenses of this nature is the High Court decision in Federal Commissioner of Taxation v Finn (1961) 106 CLR 60 (Finns case). 

That case involved a senior design government architect. He went on an overseas tour for the express purpose of studying current trends in architecture with a view to improving his prospects of future promotion. His employer requested him to travel to South America and reimbursed him for some of his expenses. The High Court found that the travel expenses were part and parcel of his employment. That connection was clear because his employer requested him to travel and provided financial assistance. The travel was also likely to lead to promotion. 

Your case can be distinguished from Finn's case in that your employer did not request you travel to country A to experience the culture of country A and challenges of the mountains. Your employer has not provided you with any financial support to travel overseas and you have not indicated any likelihood of promotion as a result of travelling to country A.

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.

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 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 not deductible.

In the Board of Review Case R47 84 ATC 380; (1984) 15ATR 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 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 trip to country A may have broadened your knowledge and benefited you as a teacher. We acknowledge that one of the reasons for your travel was to expand your knowledge and understanding of the subjects you teach. However, the courts have held that these reasons are not enough to demonstrate a sufficient connection between the travel and the income producing activities. The knowledge that you have gained is too general in nature for the expenses to be incurred in the course of gaining your assessable income. The purpose of your trip overseas was essentially private in nature.  

Accordingly, the travel expenses you incurred for your trip are not deductible under section 8-1 of the ITAA 1997.