Edited version of private ruling

Authorisation Number: 1011762235535

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Ruling

Subject: Self education expenses

Question

Are you entitled to a deduction for overseas travel expenses?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are employed as a teacher.

You travelled overseas on an organized tour to broaden your knowledge of the areas you teach.

You state that the purpose of your trip was to increase your knowledge and better describe the subjects you teach by physically being in those countries.

Your time overseas was spent on organized tours of historical areas.

You have a letter from your employer, which was dated after you travelled, supporting and encouraging the research trip as part of your professional development. Your employer did not request you to undertake the trip.

Your spouse accompanied you on the tour but they paid their own costs.

You had a carefully planned structured itinerary. Your travel diary consists of your itinerary and photographs.

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 states self-education expenses are allowable as a deduction if your current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables you to maintain or improve that skill or knowledge.

However, if the subject of the self-education is too general in terms of your income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist.

In your case, you travelled overseas to broaden your knowledge to better describe the subjects you teach by physically being in those countries. The courts have held that this reason alone is not enough to demonstrate a sufficient connection between the travel and the income producing activities.

In the Board of Review Case R47 84 ATC 380; (1984) 15ATR 824, the taxpayer a French 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.

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. In the ultimate the claims have been based on a general proposition that the overseas travel has made the taxpayer better able to carry out their duties which, of itself, is not sufficient to enable the expenditure to be allowed as an income tax deduction.

In Case U109 87 ATC 657, a science teacher who specialised in geology and was head of the school science department, joined 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. The taxpayer took many slides of the geological sites and prepared a tape commentary which he used in his teaching on his return. The Administrative Appeals Tribunal found that the trip was recreational in character and not deductible.

The circumstances of your case can be compared to the above decision, in that the knowledge you gained is too general in nature for the expenses to be incurred in the course of gaining your assessable income.

Therefore, your trip is not considered to have a sufficient connection to the duties of your employment. Accordingly, the expenses you incurred in respect of your overseas trip are not deductible under section 8-1 of the ITAA 1997.