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Deductibility of overseas travel costs

Income Tax deductions can be claimed for overseas travel costs but only to the extent that they have a connection with deriving assessable income or carrying on a business.

Deductions cannot be claimed for any part of the costs that are of a private nature, capital (such as travel to set up a new manufacturing plant) or incurred in deriving exempt income or income from employment.

In many cases, the costs need to be apportioned between deductible and non-deductible. This must be done on a basis that is reasonable. The most common way of apportioning overseas travel costs is based on the number of days spent on business as a fraction of the total number of day spent on travel. However, the Commissioner will accept other methods of apportionment if they are reasonable in the circumstances.

The cost of an international airfare needs to be apportioned where the travel has income-earning and private purposes and neither purpose is incidental to the other. However, in the case that the private portion is incidental to the income earning purpose of the trip, a deduction can be claimed for the full cost of the airfare. However, the converse applies too. In the case where the income earning purpose is incidental to the private reason for travelling, then no deduction can be claimed for the cost of the airfare. In any case, costs of accommodation and local travel may still require apportionment.

The onus of proof rest with the taxpayer, so sufficient records must be kept, to justify the claim.

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