Private ruling: Work related travel expenses
Published: November 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 01 July 2011

Ruling: Q1: Are you entitled to claim a deduction for your airfare expenses incurred to travel between City A and City B? | A1: No.

Relevant facts and circumstances: You work as a sole trader in City B. You moved to City A to live with your spouse. Since this time you have continued to work in City B during the week while your spouse remains in City A. Every week you fly to City B at midday on Monday and return to City A on the following Saturday morning. Since moving to City A you have been undertaking teleconferences with two of your clients every Monday morning.

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, except where the outgoings are of a capital, private or domestic nature. 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 is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties (see paragraph 77 of Taxation Ruling TR 95/34). However, there are situations where it has been accepted that travel by employees from home to work is deductible. These situations include: · where the taxpayer's home constitutes a place of employment and travel is between two places of employment or business, · where the employment can be construed as having commenced at the time of leaving home (for example a doctor on call), · where you travel between home and shifting places of work, that is, an itinerant occupation, or · the transportation of bulky equipment in some circumstances. | Detailed Reasoning - Home as a place of employment or business: Taxation Ruling IT 2199 considers the deductibility of travelling expenses between places of employment and/or places of business. It states that, whether a taxpayer's home constitutes a place of employment or business depends on the nature and the extent of the activities undertaken by the taxpayer at home. The fact that a room in the person's home is used in association with employment or business conducted elsewhere will not be sufficient to establish entitlement to a deduction for travel between home and the place of work. The circumstances where part of a home is considered to have the character of a place of employment or business can be contrasted with the more common case where a taxpayer maintains an office or study at home as a matter of convenience (for example, so that he or she can carry out work at home which would otherwise be done at his or her regular place of business or employment).Examples of this include: · a barrister who reads client briefs at home, · a teacher who prepares lessons or marks assignments at home, and · an insurance agent who maintains client files and occasionally interviews a client in his or her home office. In these circumstances the area of the home where the work is undertaken retains it's private or domestic character and is not considered to be a place of employment or business. This is similar to your case, in that although you do carry out some work related activities at home they are not carried out to the extent that would change the character of your home to a place of employment or business. As such, your home is not considered to be a place of employment or business. | Detailed Reasoning - Employment commencing before or at the time of leaving home: Taxation Ruling IT 112 provides that a deduction may be allowed for travel expenses where the employee is considered to be on-call and on-duty from the moment of receiving the call in terms of their duties. In Federal Commissioner of Taxation v. Collings 76 ATC 4254; 6 ATR 476, the taxpayer was on-call 24 hours a day and at times was required to attend her workplace after hours. It was held that any travel that was solely outside the normal daily journeys to and from work was deductible. In your case, you are not on-call and you are not required to carry out any travel outside of your normal weekly trip from City A to City B. The travel undertaken is simply part of your regular journey to work. Therefore your employment is not considered to have commenced before or at the time of leaving home. | Detailed Reasoning - Itinerant work: The question of whether an employee is itinerant is one of fact, to be determined according to individual circumstances. It is the nature of each individual's duties and not their occupation or industry that determines if they are engaged in itinerant work. The main features of itinerant work specified in TR 95/34 include: · Travel is a fundamental part of the employee's work. · The existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work. · 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. · 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). In FC of T v. Wiener 78 ATC 4006; (1978) 8 ATR 335 ( Wiener's Case ), a teacher was required to teach at a minimum of four different schools ('web' of work places) each day, and comply with a strict timetable that kept her on the move throughout each of these days. The Supreme Court of Western Australia concluded that travel was inherent in her employment because the nature of the job itself made travel in the performance of her duties essential. It was a necessary element of her employment that on those working days transport be available at whichever school she commenced her duties and remained at her disposal throughout each of those days. In contrast to Wiener's Case , you are not required to travel between a 'web' of work places on a daily basis. As stated above, the travel undertaken from City A to City B is simply part of your regular journey to work. Accordingly, your work is not considered to be of an itinerant nature. | Detailed Reasoning - Transport of bulky equipment: In your case, there is no suggestion that you are required to carry 'bulky equipment'. Even so, the cost of an airfare is an expense incurred to enable you to travel as a passenger. As a passenger, you are also entitled to carry a certain quantity of luggage with you, including work equipment. In these circumstances, the cost of an airfare will not be considered to have been incurred for the transporting of work equipment. | Detailed Reasoning - Conclusion: In view of the above your home does not constitute a place of employment or business, your employment does not commence at or before the time of leaving home, you are not engaged in itinerant work and your transport costs are not attributed to the transportation of bulky equipment. Therefore, the expenses that you incur to travel between City A and City B are of a private nature. As such, you are not entitled to a deduction for any of these expenses.