Edited version of private ruling

Authorisation Number: 1011768896305

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Ruling

Subject: Overseas Travel Expenses

Question 1

Can you claim a deduction for your return overseas airfare?

Answer

Yes.

Question 2

Can you claim a deduction for meals and incidentals you incurred whilst overseas?

Answer

No.

Question 3

Are you able to claim a deduction for travel expenses incurred in relation to your spouse while you were travelling together for your work because you are legally blind?

Answer

No.

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 were appointed a position at an overseas entity for a number of months.

Your employer supported this appointment with a stipend used to cover accommodation costs.

This stipend was paid directly to the overseas entity that found an apartment for you and your spouse and paid rent from the stipend.

You had to pay for yours and your spouse's return airfares overseas and received no reimbursements.

You incurred living expenses overseas including meals and incidentals.

You are legally blind.

Your spouse travelled with you on this appointment to take care of your personal well being.

Your spouse did not undertake any of your employment duties or assist you with any work related activities.

Whilst overseas you were on specified leave from your employment and still received a wage from your Australian employer.

Your home in Australia was not rented out whilst you were overseas.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 26-30

Income Tax Assessment Act 1997 Subsection 26-30(1)

Income Tax Assessment Act 1997 Subsection 26-30(2)

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Question 1

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 nature, private or domestic nature or relate to the earning of exempt income.

In Taxation Ruling TR 98/9 self education expenses are considered deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income earning activities and the self-education enables the taxpayer to maintain or improve that skill or knowledge.

In your case, you were still employed by the Australian entity; your work experience at an overseas entity is relevant to the activities by which you derive your assessable income. The objectives and contents of your position are relevant and related to your employment and it is approved by your employer. Therefore, the airfare expenses incurred for yourself would be deductible under section 8-1 of the ITAA 1997 subject to the substantiation provisions.

Question 2

Your living expenses

Generally, meal expenses incurred by an employee who lives away from home to carry out the duties of their employment will not be deductible. Expenses of this nature have been found to be private or incurred before or after the activity of earning assessable income.

This is supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466, where the Federal Court held that the expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location were not an allowable deduction as they were considered to be private expenses.

In Federal Commissioner of Taxation v. Cooper 91 ATC 4396; (1991) 21 ATR 1616 the court held that additional expenditure on food and drink was excluded from deductibility as being of a private nature.  Hill J stated that (ATC 4415; ATR 1638):

Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense.  However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home. 

Taxation Ruling TR 98/9 considers occasions where the outgoings may have the essential character of an income-producing expense. An example is where the expenditure is incurred while away from home overnight on a work related activity or away from home overnight in connection with a self-education activity. The accommodation, meal and incidental expenses incurred are deductible under section 8-1 of the ITAA 1997.

However, where a taxpayer is away for an extended period of time and has travelled to another location and established a new home, the cost of accommodation, meals and incidentals remains private in nature and not deductible under section 8-1 of the ITAA 1997.

Paragraph 93 of TR 98/9 lists the key factors to be taken into account in determining whether a new home has been established. They include:

· the total duration of the travel

· whether the taxpayer stays in one place or moves frequently from place to place

· the nature of the accommodation (hotel, motel, long term accommodation)

· whether the taxpayer is accompanied by their family

· whether the taxpayer is maintaining a home at the previous location while away, and

· the frequency and duration of return trips to the previous location.

In your case, you remained in one location for the duration of your stay. You incurred expenses for meals and incidentals. It is acknowledged that you did not rent your Australian home.

However the other factors all lend weight to the assertion that you established a new home overseas during your stay there. Although you did not rent out your home this in itself is not sufficient to determine that you have not established a new home elsewhere. It is considered that you established a new home overseas during the time you were there.

Therefore you are not entitled to a deduction for the expenses you have incurred for meals and incidentals while living overseas.

Your meals and incidentals don't meet the deductibility requirements under section 8-1 of the ITAA 1997 so substantiation doesn't need to be considered. The reasonable travel expense amounts do not apply to your situation.

Question 3

Spouse's travel expenses

Generally, expenses directly related to the taxpayer's personal circumstances (their health) are characterised as being private or domestic in nature. Therefore, the cost of employing a carer or similar service such as home help by a taxpayer is not deductible under section 8-1 of the ITAA 1997.

Subsection 26-30(1) of the ITAA 1997 generally states that you cannot claim expenses attributable to your relative's travel, if:

· you travelled in the course of performing your work duties, or in the course of carrying on a business for the purpose of gaining assessable income, and

· your relative accompanied you while you travelled.

Subsection 26-30(2) of the ITAA 1997 however, clearly states that a deduction or loss could be claimed if the relative performed substantial work duties as your employee or an employee of your employer, and that it would be reasonable to conclude that relative would have accompanied you if there was not a personal relationship with you.

In Case P31 82 ATC 141, the taxpayer, a quadriplegic, was denied a deduction for expenses incurred for an attendant accompanying him on a trip. It was held that the expenditure for the attendant related to the taxpayer's medical condition rather than to the trip undertaken in the course of his employment. The essential characteristic of the outgoing was of a private nature. The expenditure on carer services is not incurred in the course of gaining or producing assessable income.

In your case, the requirement for your spouse to accompany you on the trip is to support you on the trip and assist you to be in a position to attend your work related events. Although you may have difficulties with travelling without the aid of a carer, the expenses directly relate to your personal circumstances and are therefore characterised as being private or domestic in nature. Furthermore, your spouse will not be performing substantial work related duties as an employee of the firm you work for or as your employee as required under subsection 26-30(2) of the ITAA 1997.

Therefore, the cost incurred for your spouse's travel has no connection with your income earning activities. Consequently, the expenses associated with your spouse are not deductible under section 8-1 of the ITAA 1997.