Private ruling: Work related expenses – meals and accommodation
Date of advice: 6 March 2018
Published: June 2018
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for meals and accommodation expenses? | A1: No

Relevant facts and circumstances: In 20xx you commenced employment with a labour hire company, which provides workforce to a mine. You are currently still employed at the mine. Your ordinary hours are 38 hours per week. You are employed as a casual on a flat rate of $xx per hour. Your flat rate of pay includes the payment of overtime, weekend penalties, public holiday loading, shift penalties and 25% casual loading. The casual loading consists of: ● 11% in lieu of annual leave entitlements ● 5% in lieu of personal leave entitlements ● 4% in lieu of notice of termination requirements ● 2.5% is paid in recognition of the itinerant nature of casual work. ● 2.5% in lieu of redundancy entitlements Your 12 hour shift structure alternates between day and night. You are rostered on for 2-3 consecutive days. You are employed as a mineworker under an Enterprise Agreement. The Agreement includes the following clauses: 6.1(a): “Each new FTM will initially be engaged on a six (6) months qualifying period, during which time the FTMs performance will be monitored. The FTM’s employment status will be confirmed following completion of a satisfactory probation period.” 6.8.2: “Field Team Members (FTM) will comply with the relevant Acts, Regulations, Codes of Practice and Advisory Standards as well as the Company’s or the Client’s Workplace Health and Safety Policies and Procedures, as amended from time to time, including fatigue management. ” 17.7: “If on the instructions of the Company, an FTM resumes or continues work without having had ten (10) consecutive hours off duty, the FTM shall be paid double time until they are released from duty and will be entitled to be absent until ten (10) consecutive hours off duty has been taken, without loss of pay for ordinary working time occurring during the absence.” Your employer has advised that; ● XX is a drive in drive out mine, ● there is a generally accepted industry practice where if you live further than 70 kilometres (or 1 hour’s drive) from the mine site, the fatigue management policy will prevent you from leaving the site after a 12 hour shift when you are on consecutive shifts, ● in the case of employees who live in XX (which is approximately 30 kilometres away) would generally return home every day, whereas those from further afield would be required to stay overnight in the mine camp under the fatigue management policy, ● as of 1 December 20xx meals and camp accommodation are provided at no charge to all employees who work in excess of 12 hours under the company’s current fatigue management policy. Your home residence is XX, approximately 200km away from the worksite. You incurred accommodation expenses of $xxxx ($xx per week) for the 20XX income year being a compulsory contribution charged to you as an after-tax deduction from your pay. You do not receive a living away from home or travel allowance from your employer

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. Taxation Ruling 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees’ travel expenses? (TR 2017/D6) represents the Commissioner’s preliminary view on the general principles for determining whether an employee can deduct travel expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Paragraphs 51 to 53 of the draft Ruling state the following: Subject to paragraph 60 of this draft Ruling, employee expenditure for accommodation, meal and incidentals is of a private or domestic nature. This includes the ordinary costs of maintaining a home and consuming food and drink to go about your daily activities, such as to attend work. These costs are preliminary to the work, and are not incurred in the course of performing those activities. Likewise, where accommodation, meal and incidental expenses are incurred by an employee in relocating to a place of work or in living away from home to work, they are preliminary to the work and not deductible. The private or domestic nature of these expenses often reflects a choice the employee has made. This includes an employee’s choice about where to live. The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location has been considered by the courts on a number of occasions. In Lunney v. FC of T (1958) 100 CLR 478 the Full High Court laid down the principle that for a deduction to be allowable it is not enough for the expenditure to be an essential prerequisite to the derivation of assessable income. In that case it was held that the costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income. In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 ( Charlton’s Case ), the taxpayer was a pathologist who carried out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne, located approximately 150kms away. There was evidence that there was difficulty in finding motel accommodation in Bendigo and the taxpayer was reluctant to make the round trip back to Melbourne without rest. The taxpayer claimed that the rental expenses were incurred in the production of assessable income. Justice Crockett of the Supreme Court of Victoria ruled: The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he, not only needs to incur expense in travelling to that place but, also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible. The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations. This is further supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms’ Case ), 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. 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 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. Conversely, in Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508, the decision of Hill J considered the circumstances in which various allowances were paid to road construction and repair crews, who were required to camp away from home. At the time workers were hired, they were paid an allowance and told they would be required to camp if the work site was located at a place where reasonable transport facilities were not available to enable them to proceed to and from their homes to the work site each day. At p.4521, Hill J stated: 'Where a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods of time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, or indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character.' His Honour (at p.4522) also noted the following features of the RTA employees' working conditions that supported claims for deductibility of expenditure on sustenance and other necessary items: '...they are required, as an incident of their employment, by their employer and for the purposes of their employer to live close by their work site for relatively short periods of time. No question arises of their choosing to live in these places. Each of the persons in question has a permanent house in which he lives when not in camp. None of the employees spend inordinate periods of time in the camps so that the camp becomes their home. Their house is retained and the employees in question travel home at weekends. They do not remain in the camps.' Relevantly, the RTA employees were required to work at various sites/locations for relatively short periods of times away from the location of the depots where they regularly reported for duty. The relatively short periods for which the RTA employees worked in any one location made it impractical for them to relocate from their permanent homes to a place at or near their work location. Application to your situation | Detailed Reasoning - Accommodation: Whilst you are prevented from travelling the 200km home between consecutive 12 hour shifts under your employers fatigue management policy, we do not consider your situation comparable to that found in Roads and Traffic Authority of NSW v. FC of T (1993) 43 FCR 223. In your case, you incurred expenses for accommodation and meals due to having your home in one city and your employment elsewhere. The expenses would not have been incurred but for the distance between your work place and your family home. The expenses were incurred in order to put you in a position to be able to earn your income (a prerequisite to the earning of the income. They were not incurred in the course of you undertaking your work duties and were not incurred in gaining or producing that income. Paragraph 81 of TR 2017/D6 states that the rudimentary nature of accommodation provided to an employee by their employer may be a factor that would contribute to them being considered to not be living away from home, even where they work at the particular location over an extended period. For employees, such as fly-in fly-out workers, this may be the case where: ● the employees have no choice about where they stay ● living quarters are shared and regularly used by different employees who are on rotating shifts ● living facilities do not allow employees to self-cater and provide limited if any storage space ● employees spend minimal amounts of time at the accommodation due to the long work shifts ● employees have to leave the work location between rostered work periods, and ● family or friends cannot visit the site. Importantly in your circumstances, you had a choice to relocate closer to your workplace, but have not chosen to do so. You have been employed continuously and at no other work location. Unlike the RTA employees, you have not worked at the location for a relatively short period in circumstances where you had little or no choice to relocate close to the work location: you, have chosen to maintain your home more than 200 kilometres away from the mine rather than relocate to a place closer to the mine, where the fatigue management policy would not have prevented you from returning home after each shift. XX is the nearest town to the Mine – 30 kilometres away. XX has accommodation, schools and recreational facilities. Given the period of your ongoing employment, choosing to move to XX was a choice available to you. Moving there would have avoided the need for you to travel back and forward between XX and XX, and stay in the accommodation at XX. The expenses are considered to be private in nature as they are incurred due to your choice not to relocate. The fact that the expense is compulsory or required by an employer does not of itself determine deductibility: FCT v Cooper (1991) 21 ATR 1616. | Detailed Reasoning - Itinerant worker: Taxation Ruling TR 95/34 provides guidelines for establishing whether an employee is carrying out itinerant work. These guidelines have been established through the views taken by the Courts, Boards of Review and Administrative Appeals Tribunal in deciding when an employee’s work is itinerant. The following characteristics have emerged from these cases as being indicators of itinerancy: ● Travel is a fundamental part of the employees work. ● The existence of a web of work places in the employee’s regular employment, that is, the employee has no fixed place of work. ● The employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence. ● The employee has a degree of uncertainty of location in his or her employment (that is, no long-term plan and no regular pattern exists). ● The employee has to carry bulky equipment from home to different work sites. The characteristics above provide guidelines for determining whether an employee's work is itinerant. It is considered that no single factor on its own is necessarily decisive. In Federal Commissioner of Taxation v. Wiener 78 ATC 4006; (1978) 8 ATR 33 (Wieners Case) a teacher that was required to regularly travel to four or five different schools in any one day had travel as a fundamental part of their work. If a person performs work at a single site and then moves to other sites on a regular basis, it would be considered that a 'web' of work places exists. In Wiener's case, the taxpayer was required to attend four to five schools each day. This constituted a 'web' of work places and implied continual travel based on the frequency with which an employee moves from one work site to another. Although an employee may perform duties at more than one location, this fact in itself may be insufficient to constitute a 'web' of workplaces. Each workplace may be regarded as a regular or fixed place of employment. The element of uncertainty of location is generally another distinct characteristic of itinerant employment. Unlike an ordinary worker who makes the daily journey to his or her regular place of work, the itinerant worker often cannot be certain of the location of their work sites. In your case, although the configuration of your ordinary rate of pay includes a casual loading of 2.5% paid “in recognition of the itinerant nature of casual work”, you are not required to travel to more than one place of work during your work day or move from one work place to another on a regular basis in the course of your work. In view of this, you were not engaged in itinerant work and a deduction is not allowable for your accommodation and meal expenses. You have a regular place of work where you work on a roster basis. You are not considered to be travelling on work and therefore your accommodation and meal expenses are not deductible