Private ruling: Work related expenses - accommodation
Date of advice: 15 May 2019
Published: July 2019
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2018
Date scheme commenced: 01 July 2017

Ruling: Q1: Are you able to claim a tax deduction for accommodation expenses whilst working away from your usual place of residence? | A1: No

Relevant facts and circumstances: You have a residence in a state in Australia. You commenced employment with a City in Australia. You terminated the contract with the City prior to the contracted termination date. You have incurred accommodation expenses to facilitate accommodation in close proximity to your employment positions. You entered into a contract with a Recruitment agency you were sub-contracted to a City in Australia which was terminated. You are a sole trader with businesses in your relevant State of residence. You also performed the duties of a Justice of the Peace in your relevant state of residence and a Local Government Elected Member. Whilst working as a sub-contractor for a City in Australia you continued to return to your state of residence to provide services for your sole trader businesses, and to address your appointments as a Justice of the Peace and a Local Government Elected Member. You have not been able to secure full time employment in your home state.

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. To satisfy the first limb of section 8-1 of the ITAA 1997, the loss or outgoing must be relevant and incidental to the operations or activities from which the assessable income is produced: Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; (1949) 4 AITR 326. This principle is also expressed in terms of there having to be a sufficient nexus or connection between the outgoing and the production of assessable income. Taxation Ruling TR 2017/D6 sets out the Commissioner's view on “when are deductions allowed for employees’ travel expenses?” Expenditure on accommodation, meals and incidentals is only deductible where the employee is travelling in performing their work activities and not living away from home, for example to a conference interstate or specific training course at the request of their employer. Where accommodation, meal and incidental expenses are incurred by an employee in relocating to a place of work or in living away from home to work, they are preliminary to the work and not deductible. In FC of T 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. It was determined that the expenses were dictated not by work but by private considerations. Accommodation, meal and incidental expenses when incurred by an employee in performing an employee’s work activities are deductible, only where: ● the employee's work activities require them to undertake the travel ● the work requires the employee to sleep away from home overnight ● the employee has a permanent home elsewhere, and ● the employee does not incur the expenses in the course of relocating or living away from home. Whilst you do have a permanent residence in another state to your chosen full time employment location, your employer has not required you to undertake travel, or to sleep away from home whilst gaining or producing your assessable income. In your case the accommodation expenses incurred are private or domestic in nature as you have chosen to accept contracts for full time employment away from your normal place of residence. The costs of your accommodation are not incurred in performing an employees work activities. Similar to Toms case , your expenses reflected your choice about where to live.