Private ruling: Rental expenses
Published: March 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for any of the expenses incurred renting a residence closer to your workplace? | A1: No.

Relevant facts and circumstances: Your employment requires you to be on call when working from home. You are renting a residence that is not your usual residence. This second residence allows you to be close to your workplace and be able to attend the head office when required to do so at short notice.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: You are not entitled to a deduction for any of the rental expenses you incur as they are considered to be private in nature. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 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. A number of significant court decisions have determined that for an expense to be an allowable deduction: · it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T (1958) 100 CLR 478), · there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47), and · it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344; FC of T v. Hatchett 71 ATC 4184). Generally accommodation expenses are private in nature and are not deductible. The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms' Case ). In Toms' Case , the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible. In your case, you incur expenses for accommodation due to residing away from your usual residence. Whilst the expenses would not be incurred but for the distance of your workplace from your usual residence, the expenses are a prerequisite to the earning of assessable income. That is, they are incurred in order to put you in a position to be able to earn income but are not incurred in the actual course of gaining or producing that income. Also, the expenses are considered to be private in nature as they are incurred due to your choice of where you live and where you work. A deduction is therefore not allowable for any of the expenses you incur renting a residence closer to your workplace.

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