Private ruling: Travel expenses - home to work
Published: January 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for travel from home to work? | A1: No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. During the 2010-11 financial year, you were employed in a different state to which you and your family lived. The position is not a fly in, fly out position. You have been flying between your work and home once a month, at your own expense. You state that the experience you gain in this position will enable you to obtain a fly in, fly out role in the future. This will mean you will no longer have the expense of flying home.

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, or relate to the earning of exempt income. In considering the deductibility of travel expenses, a distinction is made between travel to work and travel on work. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted. A deduction is generally not allowable for the cost of travel by an employee between their home and their normal workplace as it is considered private in nature. The cost of such travel is generally incurred to put the employee in a position to perform their duties of employment, rather than in the performance of those duties (paragraph 77 of Taxation Ruling TR 95/34). Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 ( Lunney's case) introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The reasons given by the High Court were twofold. The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income. The essential character of the travel to and from work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and what distance from work. In your case, you have incurred expenses travelling between your home and your work on a regular basis. This travel is incurred in order to put you in a position to perform your duties of your employment; it is not incurred in the performance of the duties of your employment. The expenses you incur in travelling by plane between your home and work are private in nature. Therefore, you are not entitled to a deduction for these 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.