Issue
Is the taxpayer entitled to a deduction for travel insurance under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The taxpayer is not entitled to a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private in nature.
Facts
The taxpayer was granted an International Teaching Fellowship in Canada.
The taxpayer incurred expenses for airfares and travel insurance.
Reasons for Decision
Section 8-1 of the 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.
Expenses such as insurance policies invariably cover items that are generally private in nature, for example illness, loss of baggage, and theft or damage to belongings.
In Case T78 [1986] AATA 318; 86 ATC 1094 the Administrative Appeals Tribunal (Tribunal) allowed a deduction to a barrister for airfares to attend a work-related course. However, the Tribunal held that his claim for travel insurance was expenditure of a private nature.
In Waters v. FC of T [2010] AATA 846; 2010 ATC 10-157 the Tribunal held that a taxpayer who had acquired travel (including medical) insurance prior to commencing work overseas was not entitled to a deduction for this expenditure. The expenditure could not be regarded as being incurred by Mr Waters 'in the course of' gaining or producing his assessable income, and was otherwise not deductible as it was an expense of a private or domestic nature.
The taxpayer is therefore not entitled to a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private in nature.
Amendment History
Date of amendment Part Comment 21 February 2014 Issue Minor punctuation error corrected Reasons for Decision Included abbreviation Included summary of a more recent relevant case Relocated second sentence of second paragraph to create new paragraph Case References Included case reference for a more recent relevant case and medium neutral reference for Case T78
Date of amendment | Part | Comment
21 February 2014 | Issue | Minor punctuation error corrected
Reasons for Decision | Included abbreviation Included summary of a more recent relevant case Relocated second sentence of second paragraph to create new paragraph
Case References | Included case reference for a more recent relevant case and medium neutral reference for Case T78