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Edited version of private ruling
Authorisation Number: 1011774107773
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Ruling
Subject: visa application
Question 1
Are you entitled to a deduction for expenses you incurred in reimbursing your employer for a business sponsored visa?
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
You are a resident of Australia for tax purposes.
You were in Australia on a working holiday visa.
You were sponsored by your employer under a visa subclass 457.
You could not continue to work for your employer unless your business sponsorship was paid.
Your employer paid the cost of your sponsorship under an agreement that you would reimburse your employer.
You reimbursed your employer by direct payment from your pay.
Detailed reasoning
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature.
The courts have considered the meaning of 'incurred in gaining or producing the assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated:
For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words incurred in gaining or producing assessable income mean in the course of gaining or producing such income.
The expenditure must therefore be related to the production of assessable income.
In your case, the purpose of you obtaining your business sponsorship visa was so that you could legally remain in Australia. The costs that you incurred in making your visa application were not related to the production of your assessable income.
Accordingly, the expenses you incurred to obtain your business sponsorship visa is not deductible under section 8-1 of the ITAA 1997 as they were not incurred in gaining or producing assessable income and are private in nature.