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Ruling

Subject: Travel expenses

Question:

Are you entitled to a deduction for the cost of your airfare in relation to your trip to Country A?

Answer:

No.

This ruling applies for the following periods

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are a secondary school teacher.

After you discussed with your mentor (from your previous employment) over the phone, problems you were facing in your current employment in teaching, they invited you to Country A to explain some teaching strategies.

You travelled to Country A for a period of approximately 2 weeks.

This trip was undertaken during school term holidays.

While in Country A you spent approximately 5 days at your mentor's workplace, where you did some case studies and they demonstrated some teaching strategies in their classroom that you can apply in your teaching. They demonstrated the use of various activities tools in teaching.

You also discussed teaching strategies and case studies with a few other teachers from your previous employment.

During the trip you stayed at your relatives' house.

The only expense you incurred in relation to your trip to Country A was your airline ticket.

Your travel was solely your own decision; you were not encouraged by your employer, and you did not receive any allowance or reimbursement for your travel expenses.

The only document you have in relation to the trip is the invoice for your airfare.

Reasons for decision

Summary

It is not considered that the cost of your airfare for your trip to Country A has the essential character of an expense incurred in earning assessable income. There is not a sufficient nexus between the expense and your employment income. Accordingly you are not entitled to a deduction for this expense.

Detailed reasoning

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.

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. A deduction is also allowable if the education is likely to lead to an increase in income from your current income earning activities.

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.

It must be determined whether expenditure has the 'essential character' of an outgoing incurred in gaining assessable income. It is necessary to determine whether there is a sufficient nexus between the expenditure and the income-earning activities.

In Case U109 87 ATC 657, the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He undertook 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. He also visited some tourist attractions. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return.

The Administrative Appeals Tribunal (AAT) examined previous court decisions dealing with teachers who had claimed for the cost of overseas travel. It concluded that although the taxpayer may have been a better teacher because of the travel, this fell short of the sufficient connection required between the travel and their income earning activities. The AAT stated that some taxpayers are fortunate in finding personal and recreational satisfaction in their field of endeavour and that in this case the trip was recreational in character and not deductible.

Case Q57 83 ATC 307 involved an art teacher who travelled to Greece and Crete to update her knowledge and to keep abreast of art concepts so as to maintain and improve the quality and content of the subject she taught. The Board of Review found that the costs associated with the travel were not incurred by the taxpayer in the process of carrying out her duties as a teacher. 

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 taxpayers better able to carry out their duties which, of itself, is not sufficient to enable the expenditure to be allowed as a deduction.  

In your case, you travelled to Country A for a period of approximately 2 weeks. During this time you stayed at your relatives' house. You spent 5 days with your mentor from your previous employment with whom you discussed teaching strategies and case studies. Your employer did not encourage you to undertake the trip or pay you any allowance or reimbursement in relation to the trip.

As demonstrated by the cases mentioned above, the fact that a taxpayer may be a 'better' teacher after undertaking overseas travel is not sufficient to enable the travel expenses to be allowed as a deduction. The travel expenditure must have the essential character of an income earning expense. It is not considered that your expenditure for travelling to Country A has that essential character. Therefore, a deduction for your airfare is not allowable.

Other information

You should note that even where a sufficient nexus does exist between travel expenditure and income earning activities, for a deduction to be allowed, a travel record must be maintained where the overseas travel exceeds six days (section 900-20 of the ITAA 1997). Subdivision 900-F of the ITAA 1997 details the requirements of a travel record. A travel record must be a travel diary or similar document.

The only document you have in relation to your trip is the invoice for your airfare. Therefore, even if it was considered that the cost of your airfare was incurred in earning your assessable income, a deduction would not be allowed as you do not have a travel diary or similar document.