Private ruling: Work related expenses - itinerant worker
Date of advice: 30 January 2023
Published: 13 March 2023
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are your accommodation and travel expenses deductible in accordance with section 8-1 of the Income Tax Act 1997 (ITAA 1997)? | A1: No

Relevant facts and circumstances: You work as an employee as a specified employee for a Location 1 based contractor. You live in Location 2 There is no fixed place of work, locations can be anywhere in the region of Location 1. Your services are required when a site has a shutdown. You are aware of the location you are required to work for the period of the shutdown. Some of these sites have several shutdowns during a financial year. Periods of work can be anywhere between X to X weeks at a time, 7 days a week and up to XX hours a day. The only duties you perform at home before you go on site is to undertake the site's safety inductions. Travel is not a fundamental part of your work and therefore you need to travel to the work site, but you do not travel to various sites whilst at work. You are required to work at one location for the period of the shutdown and at the end of the day return to your accommodation. Sometimes you are required to travel to the contractors' workshop or office for various reasons. There is no pattern of workplaces, however some sites have multiple shutdowns in a financial year. You are not required to carry bulky equipment from home to the different work sites, the equipment you require is various equipment and laptops. You travel alone for work. You pay for all travel costs such as vehicle and accommodation. You do not receive a travel allowance or receive any reimbursements from your employer.

Relevant legislative provisions: Income Tax Assessment Act section 8-1

Reasons for decision: Summary: The costs you incurred for travel and accommodation while travelling from your home in Location 2 to the various sites in Location 1 are considered to be of a private nature and are incurred as a consequence of having your home in one place and working in another. Therefore, they are not incurred in gaining or producing your assessable income and are not deductible. | Detailed Reasoning - Detailed reasoning: Expenses incurred in travelling are deductible expenses under section 8-1 of the Income Tax Assessment Act 1997 where they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or a provision of the taxation legislation excludes it. Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166). Generally accommodation, meal and travel expenses incurred by a person who lives away from home in order to carry out his or her work duties, at the place of work, will not be deductible. Expenses of this nature are private, or incurred before or after the activity of earning assessable income. The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location has been considered by the courts. In Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms Case ) the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations. However, accommodation, meal and travel expenses will be allowable where they are incurred by a taxpayer while they are travelling in the course of undertaking their work duties, for example, where the taxpayer's work is itinerant such as in the case of a travelling salesperson or an interstate truck driver. For a taxpayer's work to be considered itinerant, they must be required to travel between multiple work sites before returning home. It is not sufficient that the taxpayer has different work sites if they are not normally required to travel between the work sites before returning home. Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34) provides some guidelines to assist. Paragraph 7 of TR 95/34 states: There have been a number of cases considered by the Courts, Boards of Review and Administrative Appeals Tribunal where deductions for transport expenses were allowed on the basis of the taxpayers' 'shifting places of work'. 'Shifting places of work' is another term for itinerancy. In these cases, the obligation to incur the transport expenses arose from the nature of the taxpayers' work, such that they were considered to be travelling in the performance of their duties from the moment of leaving home. The following characteristics have emerged from these cases as being indicators of itinerancy: (a) travel is a fundamental part of the employee's work... (b) the existence of a 'web' of workplaces in the employee's regular employment, that is, the employee has no fixed place of work... (c) the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence... (d) other factors that may indicate itinerancy (to a lesser degree) include: i. the employee has a degree of uncertainty of location in his or her employment (that is, no long term plan and no regular pattern exists)... ii. the employee's home constitutes a base of operations... iii. the employee has to carry bulky equipment from home to different work sites... iv. the employer provides an allowance in recognition of the employee's need to travel continually between different work sites... Paragraphs 8 and 9 of TR 95/34 considers that the above characteristics are: • not exhaustive • no single factor on its own is decisive • the individual's occupation or industry does not determine if they are engaged in itinerant work, it is the nature of the individual's duties that determines it, and • itinerant work may be permanent or temporary in an employee's duties. | Detailed Reasoning - Travel a fundamental part of employee's work: Travel from an employee's home may be considered business travel where the nature of the office or employment is itinerant. Examples include commercial travellers and government inspectors whose homes are a base of operations, from which they travel to one of a number of locations throughout the day, over a continuing period. Commonly, in these cases the employee works at the employer's office periodically (for example, once a week) to complete or file reports, pick up supplies or organise future trips. Travel between home and the office made in these limited circumstances is accepted as an ordinary incident of the business travel and, as such, is also treated as business travel. In your case travel is not a fundamental part of your work and therefore you need to travel to the work site, but you do not travel to various sites whilst at work. Travel usually consist between your accommodation and work site. This requirement is not satisfied. | Detailed Reasoning - Continual travel from one worksite to another: Paragraph 34 of TR 95/34 states: In certain work situations continual unsettled travel from one workplace to another is a common factor. In some instances, an employee's ongoing engagement may require him or her to attend various sites in different localities nominated by the employer. In most such cases the need to travel from place to place would be a necessary condition of employment. In your case continuous travel between work sites is not considered a part of your regular employment duties. Sometimes you are required to travel to the contractors' workshop or office, but this would be located within the shutdown site. You are required to work at one location for the period of the shutdown and at the end of the day return to your accommodation. This requirement is not satisfied. | Detailed Reasoning - Other factors: (i) Uncertainty of location TR 95/34 refers to Case T106 86 ATC 1192; AAT Case 17 (1987) 18 ATR 3093 (case T106) where an 'off-sider' in the building industry was required to be continually dispatched to sites at various locations as an example of a taxpayer's employment being of an itinerant nature. In your case you are aware of the location you are required to work for the period of the shutdown. Some of these sites have several shutdowns during a financial year. You do not have a degree of uncertainty of location in your employment. This requirement is not satisfied. (ii) Home as a base of operations TR 95/34 at paragraph 56 states: An employee's home may constitute a base of operations if the work is commenced at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at the work site. Whether an employee's home constitutes a base of operations depends on the nature and the extent of the activities undertaken by the employee at home. In your case you are required to undertake some unpaid duties based on the computer at home before you go on to a site these include safety induction courses. This would not be considered performing of any duties as part of the role. This requirement is not satisfied. (iii) Requirement to carry bulky equipment Paragraph 63 of TR 95/34 explains that if the transport of bulky equipment is the necessary reason for incurring transport costs, rather than any private reasons, then those costs may be allowable as deductions. Although you may carry various inspection equipment and laptops, it is not considered a bulky equipment. This requirement is not satisfied. In your situation: • Travel is not a fundamental part of your work. • You need to travel to do the work but you do not travel constantly during your work day. • You do not regularly work at more than one place of employment before returning to your usual place of residence. • You are made aware of the location you are required to work for the period of the shutdown. • Your home is not considered a base of operation. • You are not required to carry bulk equipment to carry out your work. | Detailed Reasoning - Conclusion: Whilst the travel and accommodation expenses you incurred was to enable you to stay in a close proximity of your work location for convenience to earn an assessable income, it is not necessarily required in gaining or producing that income. Therefore, the Commissioner considers that your travel and accommodation expenses are incurred as a matter of convenience and they are not expenses incurred in the course of gaining or producing your assessable income. After giving consideration to the indicators noted above, the information provided by you and your assertions, it is determined that you have not satisfied the criteria of an itinerant worker. Consequently, you are not entitled to a deduction for travel or accommodation expenses under section 8-1 of the ITAA 1997.