Dr Ethan and his wife Esther migrated to Australia in 1988. They were Russian Refuseniks, brought to Australia from the USSR under a special deal done by the then prime minister, Bob Hawke.
Ethan’s medical qualifications were not recognized so he took a job as a trainee nurse. He completed the training and applied to medical school, working weekends as a nurse to pay his way and feed his family. Esther worked at whatever she could.
It’s a common story. Economic and religious refugees come to Australia and do well.
It’s the history of Australia.
Ethan’s singlemindedness continued post-graduation. He set up a solo general practice north of Dandenong, in an under-doctored and under-resourced suburb, and went about his work. Twelve hours a day, seven days a week. He was relentlessly dedicated, and his patients loved him.
Esther became his practice manager.
They never took a break. Not one holiday in ten years. To be frank Ethan was irrationally convinced if he took a break his patients would not be there when he got back.
Something else was going to break.
So Esther and I hatched a plan: she would book them into a fictitious medical conference in Eastern Europe, in summer on the coast. Business class all the way. CPD points in abundance. Everything tax deductible. Deceived, they flew out. On the first morning Ethan said ‘well where is the conference?”. Esther replied “Sit down darling. I have something to tell you. There is no conference. We are on a holiday.” He paused, frowned, then smiled and said “Ok, let’s have a holiday”.
None of the costs were tax deductible. It was 100% private and domestic, and they had a ball.
His patients were there, waiting, on his return.
My point is this: take holidays. They are great. They are what life is about and you cannot buy memories. You have to go and get them. Ethan got it, and is now a dedicated holiday maker. He never misses a chance to fly back to Europe.
There are no deceptions these days. Esther looks for genuine medical conferences that cover Ethan’s areas of interest. The beauty of general practice is a GP can attend most specialist conferences and benefit greatly from the increased awareness and knowledge: it’s all immediately relevant to general practice.
The Australian Taxation Office’s position is the cost of a GP attending an overseas medical conference is tax deductible to the extent it is for the purpose of deriving assessable income from an existing practice activity. Purpose determines deductibility. How do you prove purpose? Paper, or an equivalent digital record, proves purpose. Contemporaneous documents are best. It starts with the e-mail to the travel agent, includes diary notes, brochures, conference papers, and ends with a better knowledge and understanding of your profession.
There are no stand out tax cases dealing with deductible overseas travel, in the sense of a coherent, complete and compendious explanation of the major issues. It’s more an ad hoc collection of tribunal rules, public and private statements by the ATO and comments by learned authors. The major points include:
- overseas travel of any duration requires written evidence
- overseas travel with 6 or more nights in a row requires a travel diary or an equivalent record
- if your travel has a private purpose apportionment between deductible business costs and non-deductible private costs may be required, based on your specific facts. For example:
- if you spend a week at a conference in Paris and a week on the French coast sun-baking only half your costs, ie 7 days out of 14, will be deductible but
- if you spend a a weekend walking around Paris, a work week at a conference, the next weekend on the French coast sun-baking, and then travel to London to visit three medical facilities over five days all your costs, ie 14 days out of 14, will be deductible. The weekend sun-baking and the down time between London medical facility visits does not impact the overall deductibility of your travel.
You are allowed to enjoy yourself. The ATO cannot unilaterally reduce your deduction to its preferred level of frugality. Business class air fares and five star hotels are fine. The ATO is charged with determining how much you incurred, not how little you could have incurred to achieve the same results.
Accompanying partners who are not doctors can be a problem. Here certain costs, such as accommodation and car hire, remain deductible because they would have been incurred even if the partner was not there. But a non-doctor partner’s air fare and similar direct costs are probably not deductible.