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Ruling

Subject: Deduction for overseas travel

Question

Are you entitled to a deduction for any of your overseas travel expenses?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are employed as a rural property salesperson. You are paid on commissions only and you pay for all your expenses.

You are to travel to overseas on an escorted tour. This tour is designed to give people an understanding of the size, scope and diversity of the rural industries in the visited countries

You have provided an itinerary of the tour and a schedule showing your analysis of time to be spent on each of travel, work related or pleasure activities. Your time will include visits to commercial properties, abattoirs, livestock sales yards, research farms and feedlots.

You state that your work as a real estate agent relies on your ability to establish contacts to get sales listings to generate your sales income and this relates closely to your knowledge of the industry and your ability to converse with potential customers.

You state that a purpose of your trip is to expand your knowledge of the industry and to use this knowledge to improve your ability to converse with your customers.

You also state another purpose will be the opportunity to meet with the other attendees who you see as potential customers and referral sources for you.

Relevant legislative provisions

Income Tax assessment Act 1997 Section 8-1.

Reasons for decision

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, or relate to the earning of exempt income.

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.

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.

The High Court of Australia has indicated that the expenditure must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478 at 497 498; (1958) 11 ATD 404 at 412).

There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income (Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 at 56; (1949) 8 ATD 431 at 435).

Consequently, it is necessary to determine the connection between your trip and the gaining of your assessable income. Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case.

In your case, you are a real estate agent who is seeking to broaden your knowledge of the rural industry in the visited countries so that you are better able ability to converse with potential customers.

We acknowledge you are a rural property salesperson, however it is considered that this self education and tour is too general in terms of maintaining or improving a skill or some specific knowledge as a real estate agent.

You intend to use the trip as an opportunity to establish business contacts with the tour leader and the other travelers.

This is also considered too general in nature for the expenses to be considered to be incurred in the course of gaining your assessable income.

Therefore, your trip is not considered to have a sufficient connection to your duties as a real estate agent. Accordingly, the expenses you incurred in respect of your overseas trip are not deductible under section 8-1 of the ITAA 1997.