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Edited version of private ruling
Authorisation Number: 1011821777796
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Ruling
Subject: Expenses - fellowship
Questions and Answers
1. Are the amounts received to cover living expenses associated with participating in a research program assessable?
Yes.
2. Are you entitled to a deduction for expenses incurred from participating in a research program?
Yes.
This ruling applies for the following periods
Year ended 30 June 2010
Year ended 30 June 2009
The scheme commenced on
1 July 2008
Relevant facts
On a number of occasions during the 2009 and 2010 financial years you took leave from your Australian employer and travelled overseas to participate in a research program.
The program paid you an amount and they withheld tax in the year ended 30 June 2009.
The program paid you an amount and they withheld tax in the year ended 30 June 2010.
The payments received were paid to offset living expenses.
The expenses you incurred were as follows:
Depart Australia 2008 - return 2009
Airfares
Accommodation
Courier
Postage
Phone
Taxi
Hire car
Mail redirection
Depart Australia 2009 - return 2009
Airfares
Booking fee
Accommodation
Phone
Taxi
Hire Car for work travel
Mail redirection
Your employer approved the travel to participate in the research program.
You did not receive an allowance from your employer.
Research leave was paid by your Australian employer for X days in 2009 and Y days in 2010.
Your spouse travelled with you and you have not claimed any of their expenses.
You have substantiation for your travel and accommodation expenses and have kept a travel diary.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Section 8-1
International Tax Agreements Act 1953 Section 4
Reasons for decision
Assessable income
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources whether in or out of Australia during the income year.
Income from overseas
In determining liability to tax to the foreign sources income received by you, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).
Section 4 of the Agreements Act incorporates the Agreements Act with the ITAA 1936 and ITAA 1997 so those Acts are read as one.
Schedule # of the Agreements Act contains the double tax agreement between Australia and country A. The country A Agreement operates to avoid the double taxation of income received by Australian residents and residents of country A.
Article # of the Agreement deals with professors and teachers and provides that income derived by an Australian resident who visits for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research at a university , college or other educational institution, is only taxable in Australia.
Therefore this income should be declared in your Australian tax return.
Allowable deductions
Section 8-1 of the 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.
You have incurred the following expenses in relation to the fellowship:
Depart Australia 2008 - return 2009
Airfares
Accommodation
Courier
Postage
Mobile phone charges
Taxi
Hire car
Mail redirection
Depart Australia 2009 - return 2009
Airfares
Booking fee
Accommodation
Mobile phone charges
Taxi
Hire Car for work travel
Mail redirection
These outgoings, with the exception of the mail redirection, are incidental and relevant to the gaining of assessable income from your fellowship and they are not of a capital, private or domestic nature. Therefore you are eligible to claim a deduction for self-education for the expenses you incurred in completing the obligations of the research program and the research leave paid by your Australian employer.
The expenditure on mail redirection is considered expenditure of a private and domestic nature. Accordingly, you are not eligible to claim a deduction for mail redirection.
Please note: You have advised that the program have taxed the amounts in country A. As explained, the double tax agreement with Ireland states that the income is only taxable in Australia. Therefore, a foreign tax credit is not available to you and you may need to approach the country A Tax authority for a refund.