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Ruling
Subject: Visa expenses
Question
Are you entitled to claim a tax deduction for the costs associated with your application for a permanent residency visa?
Answer
No
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You have had to apply for a permanent resident visa through the Australian Government.
Your employer had previously paid the costs of your work visa.
You have incurred expenses for this visa including postage charges.
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) broadly allows a deduction for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent outgoings are of a capital, private or domestic nature.
The courts have considered the meaning of 'incurred in gaining or producing the assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that
'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.'
The expenditure must therefore be related to the production of assessable income.
The cost of applying for a permanent resident visa is considered private in nature and not deductible under section 8-1 of the ITAA 1997 because the purpose of applying for the visa was to allow you to remain legally in Australia.
The cost was not incurred in the performance of your employment duties. Accordingly, as the expense you incurred in applying for a work visa was not incurred in gaining your assessable income, you are not entitled to a deduction for this cost.