Private ruling: Deduction for meal and and accommodation expenses
Date of advice: 3 November 2021
Published: February 2022
Ruling period: Year ending 30 June 2021
Date scheme commenced: 1 July 2020

Ruling: Q1: Are you allowed to claim the cost of meals and accommodation when you stay overnight near your place of work? | A1: No.

Relevant facts and circumstances: You work for an employer based in X. You previously lived relatively close to X and travelled to X to carry out your work duties. However, after a period of time, you moved a long way from the area to live for personal reasons. You negotiated with your employer to work at the premises of your employer at X for part of the week and work from home the remainder of the time. You travel from your place of residence and stay overnight at X as it is too far to travel back and forth each workday. You are paid a travel allowance by your employer. You are also employed by another organisation in the place you live, and you work at the local office of your employer.

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

Reasons for decision: Summary: The Commissioner's view on when an employee can deduct accommodation and food and drink expenses is contained in Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses travel allowances, and living-away-from-home allowances ,available on the ATO Legal Database at www.ato.gov.au. An employee may be able to deduct accommodation and food and drink expenses if they incur the expenses in gaining or producing assessable income and the expense is not of a capital, private or domestic nature (section 8-1 of the Income Tax Assessment Act 1997 ). The term 'incurred in gaining or producing assessable income' means incurred 'in the course of gaining or producing assessable income'. For an expense to be incurred in gaining or producing assessable income, it is both sufficient and necessary that the occasion of the expense should be found in whatever is productive of assessable income Accommodation and food and drink expenses are ordinarily private or domestic in nature and are generally not deductible. This includes the costs an employee incurs to maintain their usual residence and of consuming food and drink to go about their daily activities. However, where an employee travels and stays away from their usual residence overnight 'in the course of' performing their income-producing activities and incurs accommodation and food and drink expenses, these expenses will generally be deductible Accommodation and food and drink expenses are a prerequisite to gaining or producing an employee's assessable income and are not incurred in performing an employee's income-producing activities. These expenses are also private or domestic in nature. This means that even if these expenses were incurred in gaining or producing assessable income, they still would not be deductible (paragraph 14 of TR 2021/4). While accommodation and food and drink expenses must be incurred before any assessable income can be derived, a loss or outgoing is not incurred in gaining or producing an employee's assessable income merely because it is necessary. A person must eat and sleep somewhere, whether or not they engage in employment (paragraph 15 of TR 2021/4). To be deductible, the accommodation and food and drink expenses must have a sufficiently close connection to the performance of the employment duties and activities through which the employee earns income. It will not be enough to show some general link or causal connection between the expenditure and the production of income (paragraph 16 of TR 2021/4). Further, paragraph 17 of TR 2021/4 notes that the occasion of the outgoing on accommodation and food and drink must be found in the employee's income-producing activities, rather than in the personal circumstances of where the employee lives. In particular, where the accommodation and food and drink expenses are incurred because the employee's personal circumstances are such that they live far away from where they gain or produce their assessable income, the occasion of the outgoing will not be found in the employee's income-producing activities (paragraph 20 of TR 2021/4). In your case, you initially worked in relatively close proximity to your employers' work premises but then relocated to a place that was a long way from the workplace. The choice of where you live is a personal one and is not mandated by your employer. Therefore, just as the accommodation and food and drink expenses you incurred while you were living and working in the same local area were not deductible, these expenses while living far away from X and staying in the X area to work are also not deductible. The fact that you also have employment with another organisation in the place you now live does not affect the deductibility or non-deductibility of expenses that may relate to your employment with the X based organisation. The meal and accommodation costs you incur when you stay overnight near your workplace at X are not deductible.