Edited version of your written advice

Authorisation Number: 1012927318249

Date of advice: 14 December 2015

Ruling

Subject: Visa expenses

Question

Are you entitled to claim a tax deduction in full or in part for the costs associated with your application for a visa?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2015

The scheme commenced on:

1 July 2014

Relevant facts and circumstances

You have been living in Australia on a Temporary Work (subclass 457) visa for several years.

This visa is due to expire in the near future.

You incurred costs in relation to obtaining a Permanent Work (subclass 186) visa in 20XX.

You were not reimbursed by your employer for any of these costs.

You contend that you were required to incur this expense in order to maintain your employment in Australia.

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.

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:

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, or, in other words, the occasion of the loss or outgoing must be found in whatever is productive of assessable income.

Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one 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. This was the view taken by the High Court in Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; 77 ATC 4076; (1958) 7 ATR 166 (Lunney's Case) where it was found that the expenses in travelling from home to work did not have a connection with the activities carried out by the taxpayers to earn their income. It was considered that although the travel expenses were necessary and a prerequisite to earning income, the travel itself was not an activity undertaken in the course of earning their income.

Although your expenses in obtaining a visa are different to those expenses related to a driver's license or home to work travel, the principle of the expense being private in nature is the same.

It is acknowledged that without the visa you would not be able to earn assessable income. In that sense, the expenses associated with the visa are a pre-requisite to earning your income. However, as in Lunney's Case, this does not mean that the expenses were incurred in the course of producing your assessable income.

It is considered that the costs of applying for your visa were incurred to place you in a position to be able to earn income, rather than in the completion of your employment duties.

The predominant purpose of obtaining permanent residency is to allow a person to live in Australia rather than earn assessable income. Therefore expenses relating to an application for permanent residency are considered private or domestic in nature.

Accordingly, you are not entitled to a deduction under section 8-1 of ITAA 1997 for the costs associated with obtaining your visa. The fact that you obtained the visa so that you could remain in Australia legally to work does not alter this position.