Edited version of private advice

Authorisation Number: 1052369490433

Date of advice: 12 March 2025

Ruling

Subject: Business expenses - travel

Question 1

Are you entitled to a tax deduction for full expenditure on your airfares for the trip under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

Question 2

Are you entitled to claim a partial deduction for expenditure on your airfares for the trip under section 8-1 of the ITAA 1997?

Answer

Yes.

Question 3

Are you entitled to a tax deduction for the full expenditure for accommodation for the trip under section 8-1 of the ITAA 1997?

Answer

No.

Question 4

Are you entitled to claim a partial deduction for expenditure incurred on accommodation for the trip under section 8-1 of the ITAA 1997?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You are a sole trader providing services as a XXXX.

You do not ordinarily provide physical care for patrons; you provide coordination and organisation support.

You have a service agreement to provide assistance to a client. The service agreement had the aim of increasing the client's social independence.

You travelled to a destination to provide support to your client, for a 5-day trip.

Your client has high support needs, and it was expected that the likelihood of issues arising was extremely high, therefore the family requested you attend the trip to assist and provide your services.

You charged your client for the hours of coordination services provided during the trip and you were paid for your services.

You incurred expenditure on return flights to the destination to provide the coordination and organisational services listed above.

You were seated on the same flights as your client. You looked after your client on entry and exit of the plane.

You booked accommodation for a one room hotel room at the same hotel that your client stayed at.

Your accommodation was booked on a saver rate package which included breakfast for 2 people and the rate was the same regardless of the number of people in the room.

You were accompanied by your family members whilst travelling, who stayed in the same room as you, except for the first night.

On the first night you spent the night in your client's room on a rollaway bed and your family members stayed in your booked accommodation.

Your family members spent their time engaging in separate activities and assisted on certain occasions with the participants in group settings.

You did not extend your stay longer than participants were staying for any private purpose.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 subsection 26-30(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Questions 1, 2, 3 and 4

Summary

You are entitled to claim a partial deduction, apportioned on a fair and reasonable basis under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for your own flights and accommodation expenses for the trip.

Detailed Reasoning

Section 8-1 of the ITAA 1997 allows for a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing your assessable income except where the outgoings are of a capital, private or domestic nature, or they relate to the earning of exempt income, or a provision of the ITAA 1997 prevents it.

The use of the phrase 'to the extent' means expenses may be deductible only in part if incurred in gaining or producing assessable income as well as for some other use, object, or purpose.

For a loss or outgoing to be 'for the purpose of gaining or producing your assessable income', it is necessary to establish a link or nexus between the loss or outgoing and the carrying on of a business for the purpose of producing assessable income.

This means there must be a close connection between the expenditure and what it is that you do to produce assessable income, or if none is produced, would be expected to produce your assessable income.

It is not enough to show only that there is some perceived connection, general link or casual connection between the expenditure and the production of your income.

Subsection 26-30(1) of the ITAA 1997 denies a deduction for travel expenses incurred by the taxpayer to the extent those expenses are attributable to a relative who accompanies the taxpayer.

You incurred expenditure on return flights to the destination, and accommodation whilst at the destination to provide support coordination services to your client with high support needs. You were paid for coordination support services that were provided during the trip.

In this case, your family members also accompanied you to the destination. They were on the same flight and stayed in the same hotel room as you. Any expense incurred in the purchase of your family members' airfare tickets are considered entirely private in nature and are not deductible in accordance with subsection 26-30(1) of the ITAA 1997.

The hotel room you incurred expenditure on was selected based on a saver rate and was in the same hotel as your client to ensure that you were in close enough proximity to provide your services. You did not extend your stay longer than your client, and you continued to provide services on the return flight home, and upon landing.

It is clear from the invoice you issued, that there is a nexus between the expenses incurred in purchasing your own airfare ticket and the hotel accommodation, and the earning of your assessable income for the support coordination services. However, whilst the reason for travel and your income-earning activities are related, comparing the income earned versus the expenses incurred, as well as the number of hours spent on income producing activities, versus the hours that would have been spent privately with your family, it is evident that there is a private element to the trip.

Consequently, you cannot claim the full cost of the airfares or accommodation and instead will need to apportion the expenses relating to your airfares, and the accommodation cost on a fair and reasonable basis between the time spent on income earning activities and private time such as sightseeing and spending time with family.

The apportioned expenses related to earning your assessable income are deductible under section 8-1 of the ITAA 1997.