Edited version of your written advice

Authorisation Number: 1012802267521

Ruling

Subject: Sabbatical

Question 1

Are you entitled to a deduction for all the expenses you wish to claim for in relation to your overseas sabbatical?

Answer

No.

Question 2

Are you entitled to a deduction for the post, stationery, telephone and book expenses incurred for your overseas sabbatical?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20YY

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a university lecturer.

You were admitted into a studies program.

You spent a number of months overseas on the program.

You were accompanied by your spouse and children.

You continued to be paid your regular salary while overseas.

You also received an allowance.

You incurred expenses while on the sabbatical.

Your post, stationery, telephone and book expenses were solely for work-related purposes.

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 that a deduction is allowable for self-education expenses if a taxpayer's income earning activities are based on the exercise of a skill or some specific knowledge, and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge.

This ruling also indicates that if the study of a subject of self-education objectively leads to, or is likely to lead to an increase in a taxpayer's income from their current income earning activities in the future, then a deduction is allowable.

In your case, it is accepted that the overseas sabbatical has the relevant connection to your current employment duties.

Accommodation and living expenses

Accommodation and living expenses are usually considered to be private in nature.

TR 98/9 states that where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meal expenses which are incurred are in fact deductible under section 8-1 of the ITAA 1997. However if the taxpayer establishes a new home then the accommodation and meals expenses are considered to be private and would not be deductible.

The key factors in determining whether a new home has been established are:

• The total duration of the travel;

• Whether the taxpayer stays in one place or moves frequently;

• Nature of the accommodation (eg hotel, long term accommodation);

• Whether the taxpayer is accompanied by his or her family;

• Whether the taxpayer is maintaining a home at the previous location whilst away;

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

The example at paragraph 104 of TR 98/9 states:

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 (Case S80). 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 you travelled overseas for a number of months. Your family accompanied you on the trip

Based on these facts it is considered that you established a new home while overseas. Accordingly, you are not entitled to a deduction for your accommodation and living expenses as these are considered to be private in nature.

Post, stationery, telephone and books

While on your sabbatical you incurred expenses for post, stationery, telephone and books. These expenses are considered to be self-education expenses and are allowable as deductions under section 8-1 of the ITAA 1997 to the extent that they relate to your assessable income.

Travel

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless a person arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities (Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166).

A deduction is, generally, not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties, rather than in performance of those duties (see Taxation Ruling TR 95/34).

As you have established a new home overseas, your travel between your accommodation and your workplace are private and not deductible.

However, travel expenses may be deductible where they form part of a taxpayer's self-education expenses. TR 98/9 states that a deduction is available for travel expenses to attend work related conferences or seminars.

Therefore you are entitled to a deduction for the travel expenses incurred under section 8-1 where you travelled to attend a work-related conference or seminar.