Edited version of private ruling

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Ruling

Subject: Overseas travel expenses

Are you entitled to a deduction for overseas travel expenses?

No.

Relevant facts and circumstances

You are a language teacher.

You are going to travel overseas on a private family trip.

You will take holidays in order to travel overseas. The trip is not a requirement of your employment.

You incurred expenses in relation to your overseas trip.

During your trip you will experience various cultural activities.

You will bring items that your students have made.

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 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge.

Similarly if the study of a subject of self-education objectively leads to, or is likely to lead to an increase in a taxpayer's income from his or her current income earning activities in the future, a deduction is allowable.

TR 98/9 explains that expenses incurred on overseas study tours or sabbatical, 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, the ruling also explains that if the subject of the self-education is too general in terms of the taxpayer's income-earning activities, the necessary connection between the self-education expense and the income earning activity does not exist.

In Case R47 84 ATC 380; (1984) 27 CTBR (NS) Case 101, 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 Taxation 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 Case Q83 83 ATC 418; (1983) 27 CTBR (NS) Case 11, the taxpayer, a high school French and Indonesian language teacher, travelled overseas with her husband. She claimed a deduction for travel expenses relating to time spent in France and Indonesia. The taxpayer conceded that a promotion did not depend on travelling overseas. The Taxation Board of Review disallowed the taxpayer's claim. They found that even though language teachers can, in the course of ordinary tourist activities, derive benefits as teachers, this fact does not transmute tourist activities into business activities.

In your case, the circumstances of your travel are similar to travel undertaken in the cases noted above, in that you will voluntarily undertake the trip overseas. You will travel during your holidays, which means you will have no obligations to render services for your employer. You will not attend any specific courses or seminars to assist in maintaining or improving your language skills.

While we acknowledge the incidental purpose of your trip overseas is to develop your language skills and engage in cultural experiences, the knowledge you will gain is too general in nature. The value of your experiences in relation to your employment duties does not alter the essentially private nature of the trip.

Although you will bring items that your students have made, this activity is not a requirement of your employment duties and does not make this portion of the trip work-related.

Therefore, the expenses you have incurred for your overseas travel do not have a sufficient connection to your income earning activities. Accordingly, the expenses are not deductible under section 8-1 of the ITAA 1997.