Private ruling: Deduction of accommodation expenses
Date of advice: 12 December 2017
Published: May 2018
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are the accommodation expenses for which you were not reimbursed an allowable deduction? | A1: Yes

Relevant facts and circumstances: You work for Employer A and as part of your employment you collaborate with Employer B, who fund the project you are working on. You chose to rent an apartment in Country B as you anticipated that you would be spending a substantial amount of time in Country B and that it would be cheaper to rent an apartment than to stay in a motel. You started renting the apartment in 2016. You were reimbursed for the accommodation expenses until late 2016 when, due to funding cuts, the reimbursement ceased. You allowed a friend to use the apartment on a casual basis from 2016 to 2017. Your friend did not pay rent or otherwise contribute to the expenses incurred in maintaining the apartment. The lease for the apartment will end around late 2018.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 Detailed reasoning | Section 8-1 of the Income Tax Assessment Act 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. | The expenditure related to accommodation is usually considered to be a private or domestic expense, however where the expense is incurred while away from home on a work related activity the accommodation expenses are generally deductible. | Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses provides guidance on the deductibility of expenses for work related travel and allows for a deduction for expenses incurred in relation to accommodation in the course of travelling for work. | Paragraph 81 of the ruling clarifies that in relation to overseas travel covered by an allowance, reasonable amounts are for food or drink or incidental expenses only. | Under section 900-55 of the ITAA 1997, taxpayers must still obtain written evidence for accommodation expenses. A travel record must also be kept if the overseas travel involves being away from the taxpayer's ordinary residence for 6 or more nights in a row, whether or not the substantiation exception for written evidence for food, drink and incidental expenses applies. | In your case, your travel to Country B and the time spent living there are an integral part of your employment with Employer A and their association with Employer B. | As the apartment was rented in order to reduce your overall expenditure during work related activities you are therefore able to claim the costs of financing, holding and maintaining the rental property. | In order to substantiate any claims you should maintain a travel log as well as declaring any allowances in your tax return.