Private ruling: Travel and accommodation expenses
Date of advice: 23 March 2018
Published: June 2018
Ruling period: Period Ending 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are accommodation expenses an eligible deduction when on secondment for professional development? | A1: No | Q2: Are travel costs incurred for professional development secondment an eligible deduction? | A2: No

Relevant facts and circumstances: You work as a Senior Medical Therapist in an Emergency Department of a hospital in State A. You were seconded to City B in your chosen field of Medical Therapy. You have been studying for 18 months to complete your competency in this area. In order to complete your competency you are required to be observed and assessed working in an Advanced Physiotherapy Service. You were required to work at 2 different hospitals. You did not receive any additional financial support to complete this secondment other than your normal wage. You were internally transferred to 2 separate positions in the 2 hospitals to facilitate the working environment to complete your accreditation. You were away from your regular working hospital for a period of 9 weeks. Your accommodation was a self-contained, 1 bedroom unit for the 9 weeks. Your accommodation was convenient to public transport, and was located half way between the two hospitals you were required to work in. Your home in State A was unoccupied during your absence. You travelled to and from your new area of work by your personal vehicle. You did not travel back to your home during the 9 week secondment.

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. In general, accommodation expenses are considered private expenses and consequently are not deductible. Court decisions and decisions of the Administrative Appeals Tribunal/Board of Review provide an independent view and confirm this. However, it is important to distinguish taxpayers who travel in the course of carrying out their employment duties from taxpayers who are living away from home. In the latter case, the taxpayer moves and takes up temporary residence away from their usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace. For taxpayers who are living away from home, there is a change of job location and a temporary change of residence to a place at or near that location. For example, an employee who is transferred for three months to an office in another city and takes up temporary accommodation in that city whilst maintaining their own usual place of residence would be in this category. In this type of situation, the accommodation, meal and incidental expenses incurred while the person is living away from their usual home do not cease to be private and domestic in nature. That is, they are considered to retain their character as living expenses rather than becoming work related expenses. Taxation Ruling TR 2017/D6 discusses the difference between travelling on work and living away from home for work. It states at paragraph – 16. … employee costs of relocating for work and living away from home are preliminary to the work and are not deductible. Also at paragraph - 48. Relocation travel involves travel undertaken in relocating for work. Expenses incurred in undertaking this travel are not deductible. Also at paragraph – 72. Whether an employee is living away from home depends on the facts of each case. Relevant factors are: (a) the time spent working away from home (b) whether the employee has a usual place of residence at a previous location (c) the nature of the accommodation, and (d) whether the employee is, or can be, accompanied by family or visited by family or friends. And further: | Detailed Reasoning - Time spent working away from home: 73. The longer an employee spends working away from home, the more likely that the employee is living away from home. Whether an employee is considered to be travelling in performing their duties or living away from home depends on the circumstances. The time period is just one factor. TR 2017/D6 also contains the following – 79. An employee may live and make their home in any kind of accommodation, including huts and caravans. If the accommodation has amenities common in a home, such as an equipped kitchen and laundry, this would support the view that the employee is living away from home. 80. Where an employee works away from home for a considerable period and, for that period, stays in settled accommodation (such as a house, unit or apartment), this would support the view that they are living away from home. In your case you were transferred to the new hospitals for a period of 9 weeks to undertake the appropriate work to gain accreditation. We consider that for this period you were living away from home for work rather than travelling on work duties. Your accommodation expenses are considered to be 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 - Detailed reasoning: 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. In general, a deduction is not allowable for the cost of travel by an employee between their home and their normal workplace as it is considered private in nature. Taxation Ruling TR 95/34, paragraph 77 explains that the cost of such travel is incurred to put the employee in a position to perform their duties of employment, rather than in the performance of those duties. The case, Lunney v. Commissioner of Taxation ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income. The essential character of the travel to and from work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and what distance from work. In your case, you have incurred expenses for travel between your home and your work. This travel is incurred in order to put you in a position to perform your duties of your employment; it is not incurred in the performance of the duties of your employment. As such, this travel is not a part of your actual work duties. For the travel to be a fundamental part of an employees work, travel must be an essential feature of an employee’s duties. Your duties will only commence when you reach the work site where you carry out your work. You are not considered to be travelling in the performance of your duties from the moment you leave your home. The travel expenses you have incurred travelling between your place of residence and work are private in nature. Therefore, you are not entitled to a deduction for these expenses under section 8-1 of the ITAA 1997.