Edited version of your written advice

Authorisation Number: 1012792394860

Ruling

Subject: Overseas travel expenses

Question 1:

Are the fellowship payments received by you assessable income?

Answer:

Yes

Question 2:

Are you entitled to claim a deduction for your airfares and booking fees for your travel to country A and country B to undertake the fellowships?

Answer:

Yes

Question 3:

Are you entitled to claim a deduction for your airfares and booking fees to attend conferences while overseas?

Answer:

Yes

Question 4:

Are you entitled to claim a deduction for your accommodation, meal, and sundry expenses while undertaking the fellowship in country A?

Answer:

Yes.

Question 5:

Are you entitled to claim a deduction for your accommodation, meal, and sundry expenses while undertaking the fellowship in country B?

Answer:

No.

Question 6:

Are you entitled to claim a deduction for your accommodation, meal and sundry expenses while attending the overseas conferences?

Answer:

Yes.

Question 7:

Are you entitled to claim a deduction for travel expenses such as car hire, fuel and taxi expenses for travelling between your accommodation in country A and the location where you undertake your fellowship activities in country A?

Answer:

Yes.

Question 8:

Are you entitled to claim a deduction for travel expenses such as car hire, fuel and taxi expenses for travelling between your accommodation in country B and the location where you undertake your fellowship activities in country B?

Answer:

No.

Question 9:

Are you entitled to claim a deduction for travel expenses such as car hire, fuel and taxi expenses while attending the overseas conferences?

Answer:

Yes.

Question 10:

Are you entitled to claim a deduction for the work related portion of your telephone, books, stationery, postage, internet, computer and printing costs while undertaking the fellowships?

Answer:

Yes.

Question 11:

Are the additional costs incurred for the maintenance of your spouse while undertaking the fellowships deductible?

Answer:

No.

This ruling applies for the following periods:

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commenced on:

1 July 20XX

Relevant facts

You are employed as a medical specialist.

You have obtained fellowships to undertake research and learning activities in country A and country B.

You are intending to travel overseas with your partner to undertake the fellowships.

You will receive direct payments for undertaking the fellowships.

You will take part of your long service leave to assist in the funding of your overseas trip.

In order to receive the fellowships you are required to undertake research activities and produce and present your research at medical conferences whilst overseas.

The reason you are undertaking the fellowships is to improve research in your specialist medical field.

You will pay the following costs to undertake and complete the fellowships:

• air fares

• booking fees in relation to air travel expenses

• rental accommodation

• accommodation and transport to conferences to present medical research papers.

• meals, sundries and taxi hire

• hire car for work travel including fuel expenses

• telephone, books, stationery, postage, internet, postage, computer and printing costs.

Upon completion of the fellowships you will continue your employment with your employers in Australia.

You are unsure as to whether to rent out your home in Australia whilst you are overseas.

You and your partner will live in rented accommodation in country A for approximately X months.

You and your partner will live in rented accommodation in country B for approximately Y months.

Assumptions

You will keep the required documentation to substantiate your overseas travel expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1. 

Reasons for decision

Summary

Your fellowship payments meet the ordinary meaning of income and are therefore assessable.

It is accepted that your research and learning activities undertaken as part of the fellowships will improve the knowledge and skills that are required in the performance of your current income earning activities as a medical specialist. Consequently the overseas travel expenses you will incur to undertake these activities will be deductible except for your accommodation, meal, sundry and 'home to work' travel expenses while in country B as it is considered that you will establish a new home during your time there.

Any additional expenditure you incur in relation to your spouse are not incurred in earning your assessable income and are private in nature. Therefore, the expenses for your spouse are not deductible.

Detailed reasoning

Fellowship payments

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes all the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the year of income.

Fellowship payments are generally ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997 as the payments are typically made as a result of employment or services rendered, and are expected and relied upon.

In your case, you will be in receipt of fellowship payments. The fellowships are directly related to your income earning activities as a medical specialist. Payments under the fellowships will be expected and relied upon to be used for your maintenance while overseas. Thus the payments are considered to be ordinary income and therefore form part of your assessable income.

Deductibility of expenses

Section 8-1 of the 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 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge.

However, the self-education expenses will not be deductible if the study is to enable you to open up a new profession or occupation.

In your case, you have obtained fellowships in relation to your profession as a medical specialist. As part of your fellowships you will be travelling overseas to undertake research and learning activities. It is accepted that these research and learning activities will maintain and enhance the skills and knowledge that are required in the performance of your current income earning activities as a medical specialist.

Consequently, the expenses incurred in undertaking the research and learning activities have the necessary and relevant connection with the earning of your assessable income.

Travel, accommodation and meal expenses are generally private or domestic in nature. However, there can be instances where these expenses can relate to a work-related activity. TR 98/9 explains the circumstances where a deduction for accommodation, meals and travel to a work-related self-education activity may be allowable.

Airfares and booking fees

TR 98/9 provides that airfares incurred on overseas study tours or sabbaticals, on work related conferences, seminars or attending an educational institution are deductible under section 8-1 of the ITAA 1997. They are considered part of the necessary costs of participating in the tour or attending the conference, seminar or the educational institution.

In your case, the primary purpose of your trip is to undertake research and learning activities. In addition you will be attending a number of medical conferences. Therefore a deduction is allowable for your airfares and the booking fees incurred to undertake this travel.

Accommodation, meals and sundry expenses

TR 98/9 considers occasions where accommodation and meal expenses may have the essential character of an income-producing expense if the expenditure is incurred while away from home overnight in connection with a self-education activity.

However, where a taxpayer is away for an extended period of time and has established a new home, the cost of accommodation and meals remain private in nature and are not deductible under section 8-1 of the ITAA 1997.

TR 98/9 lists the key factors to be taken into account in determining whether a new home has been established. They include:

• the total duration of the travel

• whether the taxpayer stays in one place or moves frequently from place to place

• the nature of the accommodation (hotel, motel, long term accommodation)

• whether the taxpayer is accompanied by his or her family

• whether the taxpayer is maintaining a home at the previous location while away, and

• the frequency and duration of return trips to the previous location.

The question of whether a new home has been established depends on all the facts. There is no one test to satisfy all the circumstances.

Country A

From the information provided the duration of your stay in country A is for a period of X months. During your stay in country A you intend travelling to attend conferences.

These factors all lend weight to the conclusion that you will not establish a new home during your stay in country A.

Therefore, you are entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of accommodation, food and sundry expenses as these expenses are not private or domestic in nature.

Similarly your expenditure on accommodation, food and sundry expenses to attend the conferences are deductible under section 8-1 of the ITAA 1997.

Country B

TR 98/9 provides a number of examples designed to illustrate factors and circumstances that are relevant in determining whether a taxpayer has established a new home in a new location. Most applicable to your case are the examples given in paragraphs 104 to 106 which state:

104. Example 5: Katherine travelled overseas for 6 months to study at a university in Germany. She was accompanied by her husband and three children. An apartment suitable to accommodate the family was rented for the period of her stay and the family home in Australia was rented out. 

105. The relevant factors are the period of time away, the renting of the family home and staying in one place with her family. These factors indicate that a new home was established in Germany. 

106. A similar factual situation occurred in Case S80 85 ATC 589; 28 CTBR (NS) Case 88. While the case concerned the question of the appropriate apportionment of a rental expense, preliminary comments made by T J McCarthy (Member) support our view. He did not consider that any part of expenditure on accommodation was allowable as a deduction under section 8-1. He stated (85 ATC at 595; 28 CTBR (NS) at 690):

'Between ... the taxpayer was not travelling away from his home on his work. The apartment in Bonn was, and was intended to be, the family residence for five months. The older children went to school in Bonn and family life was centred in Bonn. Whilst in some cases questions of degree may be involved, I do not think there is any doubt in the present circumstances. The essential character of the rental expenditure is of a private or domestic nature.'.

In your case the duration of your stay in country B is for a period of approximately Y months. While you are undecided whether to rent out your home in Australia this in itself is not sufficient to determine that you have not established a new home in country B. However, the fact that you are to be accompanied by your spouse and the nature of your accommodation in country B leads to the conclusion that you will establish a new home while in country B. Therefore, the expenses you incur for accommodation, food, and sundries in country B will not be deductible under section 8-1 of the ITAA 1997 as they are expenses considered to be of a private and domestic nature.

Hire car, fuel and taxi expenses

A deduction is generally not allowable for the cost of travel by an employee between home and their workplace as it is considered to be a private expense (Lunney v. Federal Commissioner of Taxation (1957-1958) 81 ATC 186 ALR 225; 1958). The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties.

In your case, it has been determined that you will not establish a new home in country A. Consequently, the expenses you incur to travel between your accommodation and the location where you will undertake your fellowship activities in country A will not be considered 'home to work' travel. Therefore these expenses are deductible under section 8-1 of the ITAA 1997. If is also expected that you would incur expenses in travelling for private purposes while in country A. These expenses are not deductible so you may have to work out an apportionment for expenses such as hire car costs.

In relation to your stay in country B, it has been determined you will establish a new home in country B so any car hire, fuel or taxi expenses for travel between your accommodation and the location where you will undertake your fellowship activities in country B are not deductible under section 8-1 of the ITAA 1997 as this is 'home to work' travel and private in nature. However, where you are required to travel to other locations for work-related activities, for example, to a medical conference to present research papers, any car hire, fuel and taxi expenses you incur for this travel are deductible.

Telephone, books, stationery, postage, internet, computer and printing costs

Telephone, books, stationery, internet, postage, computer and printing costs are an allowable deduction under section 8-1 of the ITAA 1997 where they are incurred in producing your assessable income. Therefore in your case where you incur these types of expenses in producing your assessable income, the expenses you incurred are deductible under section 8-1 of the ITAA 1997 subject to appropriate apportionment between income-earning and private purposes.

Substantiating work related expenses

You should note that although self-education expenses are allowable under section 8-1 of the ITAA 1997, the substantiation provisions outlined in Division 900 of Part 5-30 of the ITAA 1997 also apply. Substantiation means that although a taxpayer may have fulfilled the technical requirements for deductibility (such as the expense being incurred in producing assessable income under section 8-1 of the ITAA 97) the deduction will be denied unless the taxpayer can prove that the relevant expenditure was incurred and more importantly proved it in the manner required under the substantiation provisions. Taxpayers who travel away from their ordinary residence for six or more nights in a row are also required to keep a travel diary or similar document in order to deduct travel expenses.

Documentation substantiating the expenses you claim a deduction for and your travel diary should be retained by you for five years from the due date for lodging the income tax return for the income year the expenditure was incurred or, if a return lodged later, the date the return is lodged.

Expenses incurred in relation to your spouse

Additional expenditure that you incur in relation to your spouse, are not incurred in earning your assessable income and are also private in nature. Therefore a deduction under section 8-1 of the ITAA for your spouse's expenses is not allowable. Further, section 26-30 of the ITAA 1997 also prevents a deduction for expenses attributable to the travel of a relative where the relative simply accompanies you while you travel.