Private ruling: Travel expenses
Published: April 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for expenses in travelling between your work place in city A to the office in city B? | A1: No. | Q2: Are you entitled to a deduction for expenses in travelling from your work place in city A to a client and then to the city B office? | A2: Yes. | Q3: Are you entitled to a deduction for expenses in travelling from the city B office to a client and then home? | A3: Yes. | Q4: Are you entitled to a deduction for expenses in travelling between your work place in city A and a client's premises? | A4: Yes.


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. A number of significant court decisions have determined that for an expense to be an allowable deduction: § it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; (1958) 100 CLR 478 ( Lunneys case )), § there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T , (1949) 78 CLR 47), and § it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). A deduction is only allowable if an expense: § is actually incurred, § meets the deductibility tests, and § satisfies the substantiation rules. | Detailed Reasoning - Home to work travel expenses: Generally a deduction is not allowable for the cost of travel between home and a normal place of work as it is considered a private expense. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. Such expenses are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction ( Lunney's case and Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616). The essentially private character of travel between home and work is not affected by factors such as the mode of transport, the availability of transport, the lack of suitable public transport, the erratic times of employment, the time of travel, the distance of travel and the necessity of travel (Taxation Ruling IT 2543). Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example, unless a person arrives at work it is not possible to derive income. The income earning duties do not generally commence until the arrival at a place of work and will cease upon departure from work. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income ( Case V111 88 ATC 712). Section 25-100 of the ITAA 1997 allows a deduction for the cost of travelling directly between two workplaces. However, subsection 25-100(3) of the ITAA 1997 states that travel between two places is not travel between workplaces if one of the places you are travelling between is a place at which you reside. In your case, you work from home most days however you sometimes work at the city B office. Both these offices are regular and normal places of employment for you and are not regarded as an alternative place of work (refer below). The Commissioner accepts that expenses incurred in travelling between home and work may be deductible in limited circumstances, for example: § the taxpayer's employment is inherently of an itinerant nature, or § the taxpayer has to transport by vehicle bulky equipment necessary for employment. | Detailed Reasoning - Itinerant nature: Where a person is required to visit several workplaces each day, they may be regarded as itinerant. Taxation Ruling TR 95/34 provides more details on itinerant workers. However, where a person is not required to visit more than one workplace in any given day, they are not regarded as an itinerant worker and the home to work travel is not an allowable deduction. In your case, travel is not a fundamental part of your work as you are not required to regularly travel in the performance of your work after you commence duty. Although you may travel to clients' premises, the degree of travel surrounding your work is not sufficient to make your work itinerant. | Detailed Reasoning - Bulky equipment: A deduction may be allowable for home to work travel if the transport costs can be attributed to the transportation of heavy, bulky or cumbersome equipment necessary for your work, rather than to private travel between home and work. A deduction is not allowable if the equipment is transported to and from work as a matter of convenience or if the equipment is of a private or personal nature. Also a deduction is not allowable if a secure area for the storage of equipment is provided at the work place. Broadly, a deduction will be allowed for the travel expenses between home and work when carrying equipment where: § there is no secure storage area provided by the employer, § the equipment is necessary for the completion of your employment duties, and § the equipment is considered bulky. The question of what constitutes bulky equipment must be considered according to the individual circumstances in each case. In Crestani v. Federal Commissioner of Taxation 98 ATC 2219; (1998) 40 ATR 1037, a toolbox which measured 57 centimetres by 28 centimetres by 25 centimetres and weighed 27 kilograms was considered as 'bulky', in the sense of 'cumbersome', and the transport cost was 'attributable' to the transportation of such bulky equipment rather than private travel between home and work. Senior Member J Block was of the opinion that the term 'bulky' should not be construed to refer only to an article of large size, but more aptly construed as similar to 'cumbersome' in the sense that it is not portable. In Case 43/94 (1994) 29 ATR 1031; 94 ATC 387, a flight sergeant with the Royal Australian Air Force was denied a deduction for the cost of transporting his flying suit and other items used for work purposes. These items were carried in: § a duffle bag measuring 75cm long x 55cm wide x 50cm deep and weighing 20 kilograms when packed, § a suit bag which weighed 10 kilograms when packed, and § a briefcase sized navigational bag which contained charts, work manuals and study materials. It was held that the mode of transporting the items was simply a consequence of the means adopted by the taxpayer to convey him to work. It was considered that the duffle bag was not of sufficient size or weight to impede facile transport. Where work equipment is not considered to be bulky, then transporting such equipment to work is not enough to change the character of travel to work from a private expense to a business or employment related expense even if it is compulsory to transport such equipment. Carrying your reference material and client files and records do not change the primary purpose of your journey. The expenses incurred are in a practical sense attributable to your travel to your place of work rather than merely to the transporting of your equipment. Therefore, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of travelling to and from work on the basis that you have to transport bulky equipment necessary for your employment. As highlighted above, the cost of travel between home and work is generally incurred to put a person in a position to perform duties, rather than in the performance of those duties (Taxation Rulings IT 2543 and IT 112). This is supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466, where the Federal Court held that expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location were not an allowable deduction as they were considered to be private expenses. The Federal Court disallowed the forest workers deduction for the cost of maintaining a caravan and other living expenses. The taxpayer's family home in Grafton was some 108 kilometres from the base camp so he lived in the caravan during the week and returned to the family home on weekends. The caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his employment in the State forest, and its purpose was to enable him to retain his residence in Grafton although he was employed in the State forest. Had he lived at a town closer to the forest, there is no question the caravan would have been unnecessary. In your case, although you are not incurring accommodation expenses in city B, the principles in the above case remain relevant in your circumstances. Your travel to and from the city B office is not travelling on work, but rather travelling to and from work. City B is a normal place of work for you. While it is acknowledged that your usual home is in city A, and you have a work office at your home, the travel between city A and city B is not work related travel. Rather it is private travel carried out to enable you to commence your employment duties. The distance of the travel does not alter the private nature of the travel. Also the fact that you check emails before and after you leave home does not change the nature of the travel. The travel expenses to and from the city B office are a prerequisite to the earning of assessable income and are not incurred in the actual performance of your work. Therefore, the associated travel expenses are not an allowable deduction under section 8-1 of the ITAA 1997. Furthermore, section 25-100 specifically denies a deduction. | Detailed Reasoning - Travel to an alternative work place: A deduction is generally allowable for the cost of travelling to and from an alternative workplace. For example, travel to and from a client's premises for work related purposes is an allowable deduction. As highlighted in paragraph 34 of Miscellaneous Taxation Ruling MT 2027, an alternative destination is not a regular place of employment. In your case travel to and from a client's premises is regarded as deductible work travel. Therefore where you travel to a client's premises either from home or from the city B office, this travel is deductible. Similarly, the cost of the return trip either to home or on to the city B office is also an allowable deduction.

Relevant facts: You are a full-time employee. | You work full-time from your residence in city A where you have a designated office for work. | You dial in remotely to the city B office on a daily basis. | Your employer has installed a separate business phone line which the employer pays for. Your employer has also installed all necessary electronic equipment including internet facilities, telephone, computer and screens, printer/fax/scanner which are owned and insured by your employer. | Your employment contract states that you do not have to attend the city B office and that your residence is your normal place of employment until such time as an alternative office facility is provided in city A. | You have the occasional client interview at your home office in city A, at your discretion. | You travel to and from the city B office at your own discretion when you consider it appropriate to hold interviews with clients and to conduct/share in training there. | Normally interaction is via electronic medium. Many office meetings are conducted electronically as well as some client interviews. | Clients can call you directly on your home business line. | You travel to the city A office usually about once per fortnight, however this can vary. | On some trips you visit clients either on your way to the city B office or on your return from the city B office. | You check your computer for emails before you leave home and on your return home on days when you travel to city B. | You carry an amount of reference material with you on your trips and regularly transport client files. Generally the manuals and files weigh approximately, 10kg however some of the larger clients files weigh approximately 20kg. | Occasionally trips are direct from home to client premises and return. | Meetings with clients are pre-planned and generally are for the purpose of client's yearly tax interviews or to address significant issues or changes in their affairs and giving advice.