Edited version of private advice

Authorisation Number: 1052384545086

Date of advice: 23 April 2025

Ruling

Subject: Work related expenses deduction

Question 1

Are you entitled to claim a deduction for the travel expenses for trip A under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the travel costs associated with XXXX portion of the trip?

Answer 1

Yes. These costs meet the requirements detailed in TR 2024/3 which explains self-education expenses are partly deductible under section 8-1 of the ITAA 1997 where they have the relevant and close connection to your current income-earning activities as an employee. As the overseas travel was undertaken for private and work-related purposes, the travel costs for airfares and accommodation will be required to be apportioned on a fair and reasonable basis.

Question 2

Are you entitled to claim a deduction for the return flight for trip A under section 8-1 of the ITAA 1997 at the end of your private holiday?

Answer 2

Yes. As the overseas travel was undertaken for private and work-related purposes, the travel costs for airfares will be required to be apportioned on a fair and reasonable basis.

Question 3

Are you entitled to claim a deduction for the travel expenses for trip B under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the travel costs associated with XXXX portion of the trip?

Answer 3

Yes. As the overseas travel was undertaken for private and work-related purposes, the travel costs for airfares and accommodation will be required to be apportioned on a fair and reasonable basis.

Question 4

Are you entitled to claim a deduction for the travel expenses for trip B under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the travel costs associated with XXXX portion of the trip?

Answer 4

Yes. As the overseas travel was undertaken for private and work-related purposes, the travel costs for airfares and accommodation will be required to be apportioned on a fair and reasonable basis.

Question 5

Are you entitled to claim a deduction for the return flight for trip B under section 8-1 of the ITAA 1997 at the end of your private holiday?

Answer 5

No. As you have moved location to another part of the world and undertook a private cruise, the return flight is considered a private expense as it only has no connection to your income earning activities.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

XX XXXX 20XX

Relevant facts and circumstances

You are currently employed as an academic at a University.

Your roles include teaching and research.

As an academic, presenting at conferences, performing or attending a key academic event is part of the university research requirement.

There is no request by the university to travel but funds are offered for research activities including travel.

The university awarded you a professional development scholarship.

You have undertaken two overseas trips.

You travelled alone for both trips.

Relevant legislative provisions

Income Tax Assessment Act 1997section 6-15

Income Tax Assessment Act 1997section 8-1

Income Tax Assessment Act 1997 section 51-10

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, or relate to the earning of exempt income.

Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? states:

15. Determining whether a particular transport expense is incurred in gaining or producing assessable income will involve consideration of the proper scope of the particular employee's work activities to determine if the circumstances of the transport expense have a sufficiently close connection to earning the employment income. It is important to have regard not just to the duties in the contract of employment, but to the nature of the work as a matter of substance.

16. While transport expenses will only be deductible if they satisfy the requirements of section 8-1, the following factors (based on relevant case law) would support a characterisation of transport expenses as being incurred in gaining or producing assessable income:

­        the travel fits within the duties of employment, that is, the obligation to incur transport expenses arises out of the employment itself and not the employee's personal circumstances

­        the travel is relevant to the practical demands of carrying out the employee's work duties or role, that is, the transport expenses are a necessary consequence of the employee's income-producing activity.

17. In addition to the factors at paragraph 16 of this Ruling, the following factors (based on relevant case law) may also be relevant in determining whether a transport expense is incurred in gaining or producing assessable income:

­        the employer asks for the travel to be undertaken

­        the travel occurs on work time

­        the travel occurs when the employee is under the direction and control of the employer

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual sets out the guidelines on the apportionment of expenses incurred where only part of the travel is work related. Self-education expenses that are allowable under section 8-1 of the ITAA 1997 include course or conference fees, airfares incurred on overseas study tours or sabbatical, on work-related conferences or seminars and where a taxpayer is away from home overnight, accommodation and meals expenses incurred on overseas study tours or sabbatical, on work-related conferences or seminars, or attending an educational institution.

Application to your circumstances

Based on the information provided, we accept that there is a nexus between your income earning activities and your trips. During the trips you took research leave during the portion of the trips which related to the attendance and preparations.

In both cases you travelled and stayed after the trip you stayed overseas and travelled after you attended the festival and the conference. As these trips were a mix between work-related and private you will need to apportion your travel expenses accordingly.

Apportionment of travel expenses

Where more than one purpose is achieved by incurring an item of expenditure (for example, the trip is partly for business and partly for private purposes), section 8-1 of the ITAA 1997 requires that the deduction be apportioned 'to the extent" that it is incurred to earn assessable income.

In determining the extent of your entitlement to deduction for your expenses under section 8-1 of the ITAA 1997, you can use any apportionment method that is fair and reasonable in your circumstances.

Paragraph 21 of TR 2024/3 considers the partial deductibility of self-education expenses. A partial deduction may be appropriate where only part of your expense is for self-education connected with your income-earning activities or where only part of the self-education is relevant to your income-earning activities.

You have provided a travel diary which outlined the number of days in both cases that were dedicated to your commitments out of your total days travelling. Any reasonable basis should be done keeping in mind the percentage of travel directly related to the academic event and limiting any deductions to those travel costs that are directly attributable to that part of the trip. Any part of the trips relating to your private holiday needs to be excluded, as they would not be deductible under section 8-1 of the ITAA 1997.

Airfares

The airfares undertaken may be deductible if they can be directly attributed to your employment. This means there must be a relationship, or close connection, between the expenditure and what it is that you do to produce your assessable income, or if none is produced, would be expected to produce your assessable income.

The initial airfares to attend in both trips would be partially deductible on this basis. Furthermore, the return airfare for trip A would still be partially deductible for Trip A as it still had some connection to your work and research activities.

However, the airfare for the return trip in trip B would be classified as private in nature as they have no connection with undertaking your work and research activities. Any nexus would be broken as you undertook a private holiday and changed location. You are not entitled to a deduction for the cost of your return airfare under section 8-1 of the ITAA 1997.

In both cases the airfares that are partially deductible (trip A and the initial airfare trip B) would only be deductible to the percentage of the trip/s that relate to an income earning activities outlined in your travel diary.

Accommodation and meal expenses

If you are away from home overnight for self-education connected with your income-earning activities, the accommodation and meal expenses you incur are deductible. They are part of the cost of participating in the self-education. The self-education expenditure is not of a private nature because its occasion is your travel away from home on income-earning activities.

The following factors indicate when your accommodation and meal expenses are private and domestic living expenses, and are not deductible:

•                     The length of the overall period you will be away from your usual residence is a relatively long one.

•                     The nature of the accommodation is such that it becomes your usual residence.

•                     You are, or can be, accompanied by family or friends or visited by family or friends.

Application to your circumstances

You have provided a travel diary with the dates of both trips. You travelled alone, overnight on both trips. You have also used research leave to attend and perform at these various events connected to your employment.

However, after attending to your employment related activities on both trips you undertook private travel. Only accommodation and meals that can be directly attributable to dates you were on research leave and employment activities will be deductible. Any accommodation and meals attributed to the part of the trip after the employment related activities will be considered private in nature and therefore not deductible. As a consequence, you will need to allocate the expenses between those that are considered private and those that can be attributed to your income earning activities on a reasonable basis.

Further matters to consider

Scholarship payment

You were successful in applying for a scholarship. The scholarship is for professional development activity such as workshop, seminar, short course or attendance at a conference, completed between XXXX and XXXX 20XX.

Where you receive an amount that is exempt income, you do not include this in your assessable income (section 6-15 of the ITAA 1997).

As a general rule, money received from scholarships is ordinary income. However, section 51-10 of the ITAA 1997 provides that, subject to some exemptions and special conditions, income received by way of a scholarship, bursary, educational allowance or education assistance by a full-time student at a school, college or university is exempt from income tax.

For the scholarship to be exempt from income tax:

•                     you must be a full-time student at a school, college or university;

•                     you must receive a scholarship and the scholarship must be provided principally for educational purposes; and

•                     there must be no condition that you be an employee of the scholarship provider or enter into any contract with the scholarship provider that is wholly or principally for labour.

The scholarship is taxable as you are not a full-time student. It is also taxable because you are receiving the scholarship as a consequence of your employment by the university and attendance at the conference.

Taxation Ruling- TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement, describes the difference between an allowance and a reimbursement.

Paragraph 6 of TR 92/15 states 'The word 'allowance' is defined in the Macquarie dictionary as 'a definite sum of money allotted or granted to meet expenses or requirements'. An allowance will usually consist of the payment of a definite predetermined amount to cover an estimated expense and will be paid regardless of whether the recipient incurs the expected expense. However, the ordinary meaning of the word 'reimburse' implies that the recipient is to be compensated exactly for an expense already incurred although not necessarily disbursed.

The scholarship payment is for a limited amount and is not paid specifically in reference to the actual total cost incurred. It is for this reason the taxable scholarship should be treated as an assessable allowance and not a reimbursement when received. This should be included as part of your assessable income in the year, when it is received.