ATO warns against excessive “study tour” tax deductions

The Tax Office has highlighted an increase in holiday packages being made to appear as work-related study tours, urging small businesses to ensure their tax deductions are accurate.

The ATO released an alert yesterday about arrangements where a taxpayer claims a deduction for expenses, incurred in relation to educational courses and seminars, where the relevant expenses don’t have a solid enough connection to the taxpayer’s employment.

“These expenses include the costs for domestic or overseas travel on a holiday activity or to a holiday destination,” the alert warns.

An example would be a professional who attends a seminar in an exotic location, where the actual work-related activity only accounts for a minority of time within the larger holiday.

The problem occurs when the professional starts deducting expenses that are not related to the business part of the trip.

While a Tax Office spokesman says the problem has been an ongoing issue, the agency has noticed “an emerging risk” over the past few months.

“Basically, we’ve noticed these schemes being marketed in various places and it’s come to our attention,” the spokesperson says.

“We don’t have any statistics on how many people have done anything wrong, but it’s something that we are monitoring and looking into at the moment. The alert is to warn people.”

Paul Drum, head of investment and business policy at CPA Australia, says taxpayers should remain cautious and guarded about how they approach this issue.

Drum say businesses need to ensure they keep a detailed list of all expenses incurred during such trips and determine whether all of their purchases are business-related before they deduct them.

He says while the agency may have noticed a rise in these types of activities lately, it is an ongoing issue and all businesses need to be aware of their obligations.

“This isn’t really a new problem. They may have found a number of new activities, but they’ve given alerts to the market before,” he says.

“Just because you go to a conference doesn’t mean the entire thing is deductable. It’s definitely incumbent on the taxpayer to perform the relevant split.”

According to Drum, this type of activity can be a trap, especially for younger professionals, as they may not realise that what they’re doing is wrong.

“The message is that you can’t assume what you’re doing can be deducted. You have to determine that what you’re deducting is a relevant business-related expense.”