Travel expenses: Combined Purposes

Whether the taxpayer is entitled to a deduction under subsection 51(1) of the Income Tax Assessment Act 1936 for expenditure on an overseas air-fare where the travel had combined work-related and private purposes.

Due to the incidental nature of the private purpose, the taxpayer is entitled to a deduction under subsection 51(1) of the Income Tax Assessment Act 1936 for the full amount of the air-fare.

The taxpayer is an academic at an Australian university. Under the terms of employment, the taxpayer is required to conduct research with a view to publication. During the year ended 30 June 1997 the taxpayer travelled by plane to an overseas destination to conduct such research. As part of this research, the taxpayer was required to interview a number of academic and industry experts. The taxpayer was engaged in such research activities for the majority of the time spent overseas. The time the taxpayer did not spend on his research activities was primarily over the period when the relevant experts were not available due to the annual shut-down of universities and industry. The taxpayer was accompanied by his family during the trip.

Subsection 51(1) of the Income Tax Assessment Act 1936 generally provides that a loss or an outgoing is an allowable deduction to the extent to which it is incurred in producing assessable income. Subsection 51(1) of the Income Tax Assessment Act 1936 also provides that a loss or an outgoing is not an allowable deduction to the extent to which it is of a capital, private or domestic nature.

The words 'to the extent to which' signify that an expense may be apportioned if it is only partly incurred to produce assessable income. In Ronpibon Tin v FC of T (1949) 78 CLR 47; 4 AITR 236 the High Court expressed the view that '... there are at least two kinds of items of expenditure that require apportionment'. These were generally: those items that are capable of dissection; and those that cannot be dissected but should be apportioned on the basis that they serve more than one object indifferently. The latter would clearly apply to an air-fare purchased for both work and private purposes ( Case R13 84 ATC 168; 27 CTBR (NS) Case 64 ).

Taxation Ruling TR 92/8 (and its replacement Taxation Ruling TR 98/9) acknowledges the above but adds:

'If the main purpose of a [trip] is the gaining or producing of income, the existence of an incidental purpose does not affect the characterisation of the related expenses as wholly incurred in gaining assessable income.'

The taxpayer is entitled to a deduction under subsection 51(1) of the Income Tax Assessment Act 1936 for the full amount of the air-fare. The expense is not required to be apportioned due to the fact that the taxpayer's purpose in incurring the expenditure is work-related. The private purpose, can in these circumstances, be said to be an incidental purpose.