Significant self-education deductions disallowed

Vakiloroaya and Commissioner of Taxation [2017] AATA 95

The AAT has disallowed many of the travel and self education expenses claimed by a taxpayer and has confirmed that a 25% penalty is appropriate.

In the Vakiloroaya case the taxpayer was an engineer who was employed by a company operating in the heating, ventilation and air conditioning industry. In his 2014 tax return the taxpayer claimed approximately $60,000 of work related deductions, with approximately $48,000 relating to self-education costs.

The ATO disallowed most of these deductions. The taxpayer claimed that some of the travel expenses were deductible because he was required to transport confidential and sensitive documents relating to work projects.

The AAT rejected this claim because:

 The taxpayer was not able to prove that any of the travel by car was work related and no evidence was produced to show that specific work related travel had been undertaken during the relevant year;

 Carrying confidential information is not a sufficient basis for claiming expenses for car travel on its own.

The taxpayer also claimed significant expenses relating to research and development projects undertaken in connection with the taxpayer’s PhD studies at university.

The AAT found that the expenses were not deductible as they did not relate to his employment activities and there was no direct connection with the university course.

The AAT found that the expenses related to his own inventions, which he hoped could be commercialised in the future. At best, the expenditure related to a possible future income earning activity, but the expenditure in this case was incurred too soon to be deductible.

The AAT also held that the taxpayer could not claim a range of other expenses such as mobile phone charges, internet expenses, membership fees, engineering reports, conference fees a

nd depreciation of equipment. The taxpayer was unable to produce evidence that he had incurred or paid some of the expenses, some expenses were incurred in a different year and in some cases, there was simply not enough evidence to show a connection with income earning activities.