Edited version of your private ruling

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Ruling

Subject: Travel expenses

Question

Are you entitled to claim a deduction for any of the costs associated with your trip overseas?

Answer: No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are a religious leader in your religious organisation.

You took a trip to the Holy Land and related areas which are mentioned in Biblical history and where there are extensive historical religious sites.

You attended lectures on the history of the Jewish nation.

You travelled to sites on organised tours of the Holy Land. These tours were available to members of the public, but by their nature were mostly attended by people from a religious following.

You were not allocated any travel allowances, and took holiday time for this travel.

You went to a tourist destination in Europe for a few days before flying home.

You were accompanied by your spouse. Your spouse assisted with documenting information and taking photos for use on your return to work. You do not wish to claim any expenses for their travel.

You have kept all receipts and a travel diary.

As a religious leader, you have limited promotional opportunities, but you do have to maintain your accreditation through professional development. Your accreditation is reviewed periodically on a point basis. If you do not maintain your professional development, your accreditation may be withdrawn.

Reasons for decision

Summary

The knowledge that you gained from your overseas trip is considered to be too general for the travel expenses to be incurred in gaining or producing your assessable income. Accordingly, you are not entitled to a deduction for your overseas travel expenses.

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.

To satisfy the first limb of section 8-1 of the ITAA 1997, the loss or outgoing must be relevant and incidental to the operations or activities from which the assessable income is produced: Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; (1949) 4 AITR 326. This principle is also expressed in terms of there having to be a sufficient nexus or connection between the outgoing and the production of assessable income.

What is involved is a process of identifying the essential character of the expenditure to determine whether it is in reality an outgoing incurred in gaining or producing assessable income.

Taxation Ruling TR 98/9 provides the Commissioner's view on the deductibility of self-education expenses. It states that self-education expenses are incurred in gaining or producing assessable income if they are directly relevant to the person's employment activities or are likely to lead to an increase in income from those activities.

TR 98/9 explains that airfares, accommodation and meal expenses incurred on overseas study tours or sabbaticals, on work-related conferences or seminars, or attending an educational institution are deductible if the necessary connection with a person's income producing activity exists.

However, TR 98/9 explains that if the subject of the self-education is too general in terms of the taxpayer's income-earning activities, the necessary connection between the expense and the income-earning activity does not exist.

There are many court decisions dealing with similar issues concerning teachers. We have referred to them here as the principles are equally applicable to your situation.

Taxation Ruling TR 95/14 discusses whether the cost of excursions, school trips and camps would be an allowable deduction for teachers. The ruling states that some of the factors that would be considered in determining the relevance of these trips to an employee teacher's employment would include the purpose of the trip, the activities undertaken and the duties of the employee teacher while on the trip. The purpose of the trip and the activities undertaken should have an educational benefit and be related to the curriculum or syllabus of the school. Although the trips may be approved by the school and the opportunity to go on these trips provide social and cultural benefits to the students and the employee teacher, these factors alone do not suffice to make the expenses in relation to the trip deductible.

The Taxation Boards of Review have seen a number of teachers seeking income tax deductions for overseas travel 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.

One particular case is Case U109 87 ATC 657. In this case, 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) concluded that the trip was essentially recreational in character and not deductible. The AAT also 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.

The circumstances of your travel are similar to the travel undertaken in the case noted above. The trip may have broadened your knowledge and benefited you in your profession. However, the courts have held that these reasons are not enough to demonstrate a sufficient connection between the travel and the income producing activities. The knowledge that you have gained is too general in nature for the expenses to be incurred in the course of gaining your assessable income.

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