Private ruling: Accommodation expenses
Published: June 2012
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for your accommodation expenses? | A1: No.


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

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of 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 ITAA 1997 prevents it. 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 ( Lunney's case )), · 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). | Detailed Reasoning - Accommodation expenses: Expenditure on the daily necessities of life (for example, accommodation, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature. Exceptions to this are where you are undertaking work related travel and are required to stay away overnight. However, no deduction is allowable if a taxpayer is merely maintaining accommodation close to their usual work location for convenience. Home to work travel is regarded as private in nature and not work related travel. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. Such expenses are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction. ( Lunney's case and Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616). The essentially private character of travel between home and work is not affected by factors such as the mode of transport, the availability of transport, the lack of suitable public transport, the erratic times of employment, the time of travel, the distance of travel and the necessity of travel (Taxation Ruling IT 2543). 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 ( Case V111 88 ATC 712). In Federal Commissioner of Taxation v. Toms 20 ATR 466; 89 ATC 4373 ( Toms case ), the Federal Court held that expenses incurred in relation to accommodation near the work place, while maintaining a family residence in another location, were not an allowable deduction as they were considered to be private expenses. The Federal Court disallowed the forest workers deduction for the cost of maintaining a caravan and other living expenses. The taxpayer's family home in Grafton was some 108 kilometres from the base camp so he lived in the caravan during the week and returned to the family home on weekends. The caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his employment in the State forest, and its purpose was to enable him to retain his residence in Grafton although he was employed in the State forest. Had he lived at a town closer to the forest, there is no question the caravan would have been unnecessary. Your situation is comparable to Toms case . In your case you incur accommodation expenses near your work place. We acknowledge the distance travelled, however, your accommodation expenses are incurred to put you in a place where you are closer to your place of employment. Place A and site B are regarded as your normal places of work. The accommodation expenses incurred are not related to the actual performance of your duties. They are more a convenience and a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income. Furthermore, the essential character of the expense is of a private or domestic nature. Accordingly, you are not entitled to a deduction for the accommodation expenses under section 8-1 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are currently working on a project being developed at site B which is more than Xkm from your residence. | The work project is for a 12 month period. | You are provided with office space in place A, which is approximately Ykm from your residence. | You visit site B usually one day a week and spend most of the day there. Some weeks you may be at site B on two days. | Because of the amount of travelling it was agreed that you would work from your home office at least one day per week. You generally work in place A corporate office three days per week. | The contract requires at least 45 hours per week of professional service, worked over five days. | The travel time from your home town to place B is over one hour. From place A to site B is approximately two hours. | The roads travelled on are a single carriageway highway with significant truck traffic. | Because of the long travel times between place A and site B, you stay either in place A or C for two separate nights a week. Place C is within 30km from site B. This is safer than driving three to five hours per day in addition to at least nine working hours. It allows you to be in your home town five nights per week. | You pay for your own accommodation. You generally stay in motels.