Edited version of your written advice

Authorisation Number: 1012932082405

Date of advice: 23 December 2015

Ruling

Subject: Overseas tour expenses

Question

Are you entitled to a deduction for your overseas tour expenses?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a school teacher.

You participated in an overseas tour marketed to teachers.

The tour was an opportunity to acquire teaching resources and develop lesson plans for the school curriculum.

Participation in the tour was not initiated by your employer.

All expenses were paid by you.

You did not keep a travel diary.

Your spouse accompanied you on the tour.

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. 

Taxation Ruling TR 98/9 provides the Commissioner's view on the deductibility of self-education expenses. It states that self-education expenses are incurred in gaining or producing assessable income if they are directly relevant to the person's employment activities or are likely to lead to an increase in income from those activities.

TR 98/9 explains that airfares, accommodation and meal expenses incurred on overseas study tours or sabbaticals, on work-related conferences or seminars, or attending an educational institution are deductible if the necessary connection with a person's income producing activity exists.

However, TR 98/9 explains that if the subject of the self-education is too general in terms of the taxpayer's income-earning activities, the necessary connection between the expense and the income-earning activity does not exist.

The ruling also states that the intention or purpose in incurring an expense can be an element in determining whether the whole or part of the expense is an allowable deduction.

The Taxation Boards of Review have seen a number of teachers seeking income tax deductions for overseas travel expenses. Most of the claims were rejected because the teachers were not able to establish a positive connection between the overseas travel and the performance of their duties of employment as teachers.

One particular case is Case U109 87 ATC 657. In this case, the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He undertook a 17 day trip to Indonesia organised by a natural museum history society of which he was a member. During the course of the trip, he visited several volcanoes and other geological sites, and attended a geological congress. He also visited some tourist attractions. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return. The Administrative Appeals Tribunal (AAT) concluded that the trip was essentially recreational in character and not deductible. The AAT also stated that some taxpayers are fortunate in finding personal and recreational satisfaction in their field of endeavour and that in this case the trip was recreational in character and not deductible.

The circumstances of your case can be compared to the above decision. While we acknowledge that the course is aimed at educators and your employer has provided a letter supporting your claim, these are only some of the factors taken into consideration when determining the deductibility of the expenses.

Although the tour is marketed to teachers, the itinerary shows that the tour is indistinguishable from, or at least very similar to, tours marketed to the general public. There is little or nothing about the tour that is specifically of interest only to teachers. Our view that the tour is recreational in nature is supported by the fact that your spouse chose to spend a considerable amount to also undertake the tour. It is considered unlikely that your spouse would have done this if the tour was only of interest for teachers.

Additionally, while the trip may enable you to have first-hand knowledge which would benefit you as a teacher, the courts have held that this reason alone is not enough to demonstrate a sufficient connection between the travel and the income-producing activities. The knowledge that you will gain is too general in nature for the expenses to be incurred in the course of gaining your assessable income as a school teacher. Your trip is seen to be predominantly private in nature and as such no deduction can be claimed for the overseas trip as there is an insufficient connection between the expenses incurred and the gaining of assessable income.

Therefore, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for the travel expenses incurred.