Edited version of private advice

Authorisation Number: 1052225764607

Date of advice: 23 February 2024

Ruling

Subject: Deductions - work related expenses

Question

Were you entitled to claim deductions for work visa fees?

Answer

No.

The time limit to amend your income tax return is two years from the date listed on the notice of assessment. If you want to amend a tax return after the time limit has passed, you may be able to lodge an objection. While the time limit for lodging amendments and objections is the same, you can request an extension of time to lodge an objection in some circumstances.

For more information go to our website ato.gov.au and type QC 33803 into the search bar for more information.

This ruling applies for the following periods:

Year ended 30 June 20X

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

In 20XX, your Employer, sponsored your temporary Australian work visa.

On XX XX 20XX, you were granted a Temporary Work (Skilled) (subclass 457) Australian visa.

On XX XX 20XX, you commenced in your job with the Employer.

In the 20XX income tax year, you amended your income tax return to claim the temporary visa expenses as a deduction.

Your employer indicated they would like to keep you within their organisation.

To allow you to continue working in Australia, with your Employer, you applied for a permanent Australian visa.

In 20XX, your Employer sponsored your application for a permanent Australian visa.

On XX XX 20XX, you were granted an Employer Nominated Australian visa (subclass 186).

In the 20XX income tax year, you claimed the permanent visa fees as a deduction.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

In your case, the visas placed you in a position to legally remain in Australia, in order to earn income. There is no nexus to the earning of income, you are not entitled to a deduction for the costs associated with your Australian visas under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

The time limit to amend your income tax return is two years from the date listed on the notice of assessment. If you want to amend a tax return after the time limit has passed, you may be able to lodge an objection. While the time limit for lodging amendments and objections is the same, you can request an extension of time to lodge an objection in some circumstances.

For more information go to our website ato.gov.au and type QC 33803 into the search bar for more information.

Detailed reasoning

Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income however it will not be allowed if the expense is of a private or domestic nature.

The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47, the High Court stated that:

'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.'

In Waters v. FC of T [2010]AATA 846, the AAT denied the taxpayer's claim for deductions for expenses (including airfares, passports and visas) incurred in relation to overseas employment. In this case, the taxpayer arranged the work visa and the AAT held that there was no entitlement. The costs were incurred at a point too soon to be regarded as being incurred in the course of gaining or producing assessable income. To be deductible, the expenditure must be incurred in the course of earning income.

Taxation Ruling (TR) 2020/1 - Income tax: when are deductions allowed for employees' transport expenses? Discusses whether a particular expense is incurred in gaining or producing assessable income.

Paragraph 16 explains that for expenses incurred by employees, the fundamental question is whether an expense is incurred in the course of earning employment income. This involves considering the proper scope of the particular taxpayer's work activities to determine if the circumstances of the expense have a sufficiently close connection to earning the employment income.

Paragraph 17 states that this means that an expense deductible for a taxpayer in one job is not necessarily deductible for another taxpayer holding a similar job. Variations in employment duties may have a significant bearing on the extent of connection between an expense item and the earning of income, which could explain differences in deductibility outcomes.

Application to your circumstances

In your case, the temporary visa placed you in a position to legally remain in Australia, in order to earn income. There is no nexus to the earning of income as the visa was needed prior to employment and to allow you to remain in Australia.

You then made a decision to apply for the permanent visa, to enable you to continue to earn income with your employer, in Australia.

The costs of obtaining for both your temporary and permanent Australian visas are considered private in nature. The expense was not incidental and relevant to your current employment duties and was not incurred in the course of gaining or producing your assessable income. You are not entitled to a deduction for the costs associated with your Australian visas under section 8-1 of the ITAA 1997.