Private ruling: Deduction for motor vehicle expense
Published: October 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to claim a deduction for the cost of maintaining your motor vehicle? | A1: No.

Relevant facts and circumstances: You live in X and you work at X. You work a seven day on / seven day off roster and travel to work at the start of each roster. You drive a motor vehicle to work. You have fitted four new tyres and bulbar to your car and had maintenance carried out. You say that due to the distance that you travel to work you need a reliable and well maintained vehicle. You say 90% of your use of your car is for work use and you keep a log book to track use.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 40-25

Reasons for decision: Summary: Work-related expenses generally fall for consideration under section 8-1 and section 40-25 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which 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. Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless a person 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 (Lunney's Case)). A deduction is, generally, not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties, rather than in performance of those duties (see paragraph 77 of Taxation Ruling TR 95/34). In your case, your travel expenses are of a private nature and are incurred as a necessary consequence of living in one place and working in another ( Lunney's Case ), therefore, they are not deductible. The purchase of a bulbar and tyres for your car are considered to be the purchase of depreciable assets and could be depreciated to the extent that they are used for income producing activities. Section 40-25 of the ITAA 1997 allows a deduction for the work-related portion of the decline in value of depreciating assets. However as these assets are not used for income producing activities, no deduction for their depreciation would be allowable. Accordingly, all your motor vehicle expenses are considered to be of a private or domestic nature. The expenses do not have the character of an outgoing incurred in gaining assessable income, therefore, are not deductible.