Edited version of private advice

Authorisation Number: 1051681223393

Date of advice: 21 May 2020

Ruling

Subject: Claiming deductions while on paid research leave

Question 1

Can your accommodation, meal, visa, travel/car expenses and other personal costs incurred during paid research leave be claimed as allowable deductions?

Answer

No

Question 2

Can your flight expenses incurred during paid research leave be claimed as allowable deductions?

Answer

Yes

Question 3

Can you claim the flights, meals and accommodation expenses as allowable deductions for your children who accompanied you on your paid research trip?

Answer

No

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You applied to your employer and were deemed eligible. It was a similar role. Full salary was paid during this time and an additional allowance was paid to assist with dependants travel.

You went to learn about the way things are done there and developed a couple of research projects, and wrote a book.

You departed Australia late 20XX.

The program was undertaken from early 20XX to mid 20XX.

You separated from your spouse in late 20XX.

Your property was sold on late 20XX prior to your departure and settled early 20XX just after you went overseas. You stated you kept your belongings and car in Australia and paid for those expenses as well.

You took your dependent children with you overseas.

You rented an apartment including furniture. You stayed the whole time within the area you were living in.

You were required to pay rent until mid 20XX.

You incurred meal costs to prepare meals and purchased meals at restaurants and other food outlets. You incurred travel expenses for taxi travel, car hire, petrol and public transport for yourself and two dependants.

You came back on mid 20XX because your child got sick.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 26-30

Income Tax Assessment Act 1997 Division 900

Reasons for decision

Question 1

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 Income tax: deductibility of self-educationexpenses incurred by an employee or a person in business, discusses the Commissioners views on the circumstances under which self-educationexpenses are allowable as a deduction.

Accommodation, meals and personal costs

Expenditure on accommodation ordinarily has the character of a private or domestic expense. This is due to the fact that while accommodation expenses are necessary to place an individual in a position to earn assessable income, the expenses are not directly related to the individuals income earning activities.

However, the occasion of the outgoing may operate to give the expenditure the essential character of an income-producing expense.

Paragraph 89 of Taxation Ruling TR 98/9 States:

Where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meal expenses incurred are deductible under section 8-1. (Examples include an overseas study tour or sabbatical, a work-related conference or seminar or attending an educational institution.) They are part of the necessary cost of participating in the tour or attending the conference, the seminar or the educational institution. We do not consider such expenditure to be of a private nature because its occasion is the taxpayer's travel away from home on income-producing activities.

However, paragraph 24(c) of TR 98/9 states:

expenditure on accommodation and meals where a taxpayer who has travelled to another location for self-education purposes has established a new home.

Paragraph 93 of TR 98/9 lists the key factors to be taken into account in determining whether a new home has been established. These factors 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, e.g., hotel, motel, or 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. 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 the new location. Most applicable to your case is Example 5 at paragraphs 104 and 105 which states:

Katherine travelled overseas for six 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.

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.

In your case, you were overseas for approximately X months, accompanied by your family and staying in an apartment. You were not maintaining a residence in Australia whilst you are away. Consistent with the principles established in TR 98/9, the Commissioner is satisfied that you had established a new home as part of the ADP. However, where it is considered that a taxpayer has established a new place of residence, the accommodation expenses will retain its private nature and will not be deductible.

Therefore you are not entitled to claim a deduction relating to accommodation, meals and personal expenses such as travel insurance, furniture rental, utility costs, transportation, car hire, fuel and household needs. In these circumstances, expenditure is private in nature and not allowable under section 8-1 of the ITAA 1997.

Visa

The purpose of obtaining a visa is to allow you to enter and stay in another country. The expense is not considered to be incurred in the course of gaining or producing your assessable income. Therefore, the expense is private in nature and is not an allowable deduction under section 8-1 of the ITAA 1997.

Travel

Generally, costs of travelling between home and work are private in nature and are not deductible. In Lunney v. FC of T (1958) 100 CLR 478 the Full High Court laid down the principle that for a deduction to be allowable it is not enough for the expenditure to be an essential prerequisite to the derivation of assessable income. In that case it was held that the costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income.

Travel is not an allowable deduction.

Question 2

Paragraph 111 of TR 98/9 further provides that airfares incurred on overseas study tours or sabbatical, on work related conferences or 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 or seminar or the educational institution.

You incurred the expense of airfares in travelling to the overseas institution related to your income earning activities. You will therefore be entitled to a deduction for these costs under section 8-1 of the ITAA1997.

Documentation satisfying the requirements of section 900-15 or 900-120 of the ITAA 1997 is required to substantiate the expenses included in these claims.

Question 3

The expenses relating to the children for meals, accommodation and flights are not deductible. Costs relating to the children are not deductible as per section 26-30 ITAA 1997. This states:

You cannot deduct under this Act a loss or outgoing you incur, insofar as it is attributable to your relative's travel, if:

(a) you travelled in the course of performing your duties as an employee, or in the course of carrying on a business for the purpose of gaining or producing your assessable income; and

(b) your relative accompanied while you travelled.

The expenses in relation to your children are private in nature and not an allowable deduction.