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Ruling

Subject: Deduction for overseas travel expenses

Question 1

Are you entitled to a deduction for a portion of your flight expense where the travel is for both work and private purposes?

Answer

Yes

Question 2

Are you entitled to claim the amount you incurred for flight expenses where you were only partly reimbursed for the expense?

Answer

Yes

This ruling applies for the following period

Year ended 30 June 2011

The scheme commences on

1 July 2010

Relevant facts and circumstances

You travelled overseas for work on two occasions and on both occasions you travelled business class.

In 20XX you travelled overseas and you included in your trip a private holiday. Your conference was for seven days and this was followed by a fourteen day holiday. You were not reimbursed for this trip.

In 20XX you travelled overseas and there was no private travel included. Your employer reimbursed your flight expenses for this trip at the economy fare rate.

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.

Apportionment

Where your overseas travel included both business and private activities and there was a significant element of both the private and business portions involved, there is a dual purpose for the trip.

Taxation Ruling TR 98/9 discusses the apportionment of overseas travel expenses where there is a dual purpose for the travel. Although this ruling deals with deductions of self-education expenses, the principles are the same for all cases requiring apportionment and could equally apply to business travel expenses.

TR 98/9, paragraph 65 states that 'Both Ronpibon Tin NL (78 CLR at 59) and Fletcher & Ors v. FC of T (1991) 173 CLR 1 at 16; 91 ATC 4950 at 4957; 22 ATR 613 at 621 recognise there are at least two kinds of expenditure that require apportionment under section 8-1 (ITAA 1997). The first is expenditure in respect of a matter where distinct and severable parts are devoted to gaining income and other parts are devoted to some other end. If a study tour or work-related conference or seminar was mainly devoted to a private purpose, such as having a holiday, and the gaining or producing of income was merely incidental to the private purpose, only those expenses directly attributable to the income-earning purpose would be allowable'.

In your case you travelled overseas. You combined business-related activities with a holiday and seven of the twenty-one days were for business-related purposes.

You are only able to claim a deduction for expenses incurred to the extent that they are for income-producing purposes under section 8-1 of the ITAA 1997.

Where there is dual purpose travel the Commissioner will allow a 50/50 apportionment of travel costs.

Incurred amounts

In your case you have incurred the air travel of your trips at the business class rate. There is no requirement that your incurred expenses be adjusted to reflect a rate that is otherwise different to what was paid for.

Section 8-1 will allow you to claim your overseas travel expenses at the business class rate. On the trip your travel expenses are to be adjusted to take into account your private expenditure with a 50/50 apportionment.