Private ruling: Zone Rebate and Travel Expenses
Date of advice: 12 August 2016
Published: September 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 01 July 2015

Ruling: Q1: Are you entitled to a deduction for return air fares to City A every four weeks, food and accommodation expenses in City B and travel to and from your work site every day? | A1: No | Q2: Are you entitled to a Zone A Offset for any of the time spent in City B for 2016? | A2: No

Relevant facts and circumstances: You currently reside in City A. You are employed at a work site near City B. You pay for your own travel between City A and City B. You live in provided workers accommodation in City B. You incur expenses in City B for travel between your accommodation and the worksite.

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. Home to work travel expenses 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. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166 ( Lunney's Case )). A deduction is, generally, not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties, rather than in performance of those duties (see Taxation Ruling TR 95/34). The lack of suitable public transport, the erratic hours and times of employment, the time of travel, the distance of travel and the unavailability of residential accommodation near the place of work are not factors which will alter the essential character of travel between home and work. In your case, you incur expenses to travel between your home in City A and City B and between your accommodation and your work site in City B in order to attend work. These expenses are a prerequisite to the earning of assessable income and are not incurred in producing that income. In addition, these expenses are of a private nature and are incurred as a necessary consequence of living in one place and working in another ( Lunney's Case ). Therefore, they are not incurred in gaining or producing your assessable income and are not deductible under section 8-1 of the ITAA 1997. Accommodation expenses The cost of accommodation and food are generally considered to be private expenses because a man must eat and sleep somewhere, regardless of where he works and what he does. As discussed above, certain expenditures are incurred in order to be in a position to be able to derive assessable income, and are not in the course of gaining or producing assessable income. The accommodation and food expenses incurred by you to stay in close proximity to your work-place are a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income. Further, the essential character of the expenditure is of a private or domestic nature as it arises due to the choice of where you live and where you work. Therefore, you are not entitled to a deduction for the costs incurred for accommodation and food under section 8-1 of the ITAA 1997. Zone rebate A zone rebate is allowed in certain circumstances for those living in remote areas. However, from 1 July 2015, the zone rebate excludes "fly in fly out" and "drive-in drive-out" (FIFO) workers where their normal residence is not within a "zone". FIFO workers who spend more than 183 days in a particular zone, but whose normal residence is not in that zone, will not qualify for the zone tax offset for that zone and will instead be taken to be a resident of the area incorporating their normal residence. You are considered to be a FIFO for the purposes of the Zone tax offset. City A is not in a within a zone area. Therefore you are not entitled to a zone rebate.