Private ruling: Travel and accommodation
Published: September 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for travel between home and City B? | A1: No. | Q2: Are you entitled to a deduction for accommodation in City B? | A2: No. | Q3: Are you entitled to a zone tax offset if you were in City B in excess of 182 days in the financial year? | A3: 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 allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature. | Detailed Reasoning - Travel: It is settled law that expenses of travelling to work are not deductible as they are not incurred in gaining the assessable income, but as a pre-requisite to gaining assessable income ( Lunney v FC of T; Hayley v FC of T (1958) 100 CLR 478). 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 ( Taylor v Provan 1975 AC 194). In your case, you are travelling to work and the expenditure incurred is not an allowable deduction . | Detailed Reasoning - Accommodation: Generally, accommodation expenses are private in nature and are not deductible. Where a taxpayer is away for an extended period of time, the associated costs including accommodation and meals remain private in nature and are not deductible. Even though the expenditure had a causal connection with the earning of income, the expenditure is inherently of a private or domestic nature and therefore no deduction is allowable. The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms' Case ). In Toms' Case , the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible. You incur expenses for accommodation in City B. As in Toms' Case , the expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income. A deduction is therefore not allowable for your accommodation expenses. | Detailed Reasoning - Zone tax offset: You are entitled to a zone tax offset where you meet certain conditions. To qualify for the zone tax offset, you must have lived or worked in a remote area (not necessarily continuously) for: • 183 days or more during the current income year; or • 183 days or more in total during the current and previous income years - but less than 183 days in the current year and less than 183 days in the previous income year - and you did not claim a zone tax offset in your previous year's tax return. The Australian Zone list provides a list of areas which fall within the different zones. It states that City B is in Zone A. Therefore, if you were in City B in excess of 182 days, you are entitled to a zone tax offset for zone A.

Relevant facts: You live in City A and work in City B. | You fly back home to be with your family on your days off. | You have rented accommodation in City B. | You incur expenses for travel and accommodation.