Private ruling: deductibility of relocation expenses
Published: November 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for relocation expenses? | A1: 

Relevant facts and circumstances: You relocated to Australia for employment on a 457 Visa. You incurred expenses in moving, living and purchasing goods and services in order to live in Australia. Your employer paid you a one-off lump sum to assist you with your relocation and living expenses. You do not receive a living away from home allowance from your employer.

Relevant legislative provisions: Income Tax Assessment Act 1997 - section 8-1

Reasons for decision: Summary: The expenses you incurred to relocate were to put you in a position to earn your assessable income, rather than in the earning of that income. Therefore, you are not entitled to a deduction for the relocation expenses. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 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. Taxation Ruling IT 2614 examines the deductibility of relocation expenses. The ruling states that expenses incurred in relocating to take up an appointment with a new or existing employer are not allowable deductions as they are private or domestic in nature. This is so, regardless of whether an allowance has been paid, or if the relocation was involuntary. Taxation Ruling IT 2481 also discusses this expense. At paragraph 9, the ruling states the expenditure is not incurred in gaining or producing income and is not deductible as the taxpayer is not travelling on work, but to work. In your case, you incurred expenditure in relocating to Australia for employment reasons. As discussed above, the expenses you incurred were to put you in a position to earn your assessable income, rather than in the earning of that income. Therefore, you are not entitled to a deduction for the relocation expenses.

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