Private ruling: Overseas accommodation
Date of advice: 8 April 2016
Published: May 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim expenses for rented accommodation while working overseas? | A1: No


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 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. Accommodation expenses Expenditure on the daily necessities of life (for example, accommodation, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature. Generally, accommodation expenses and costs of travelling between home and work are private in nature and are not deductible. 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. Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business considers occasions where accommodation expenses and other travel expenses may have the essential character of an income-producing expense where the expenditure is incurred while away from home overnight on a work related activity. Such expenses incurred may be deductible under section 8-1 of the ITAA 1997. However, where a taxpayer is away for an extended period of time and has established a new home, the associated costs including accommodation and meals remain private in nature and are not deductible under section 8-1 of the ITAA 1997. Although TR 98/9 relates to self-education expenses, the principles outlined are relevant in your circumstances. TR 98/9 lists the key factors to be taken into account in determining whether a new home has been established. They include: • the total duration of the travel • whether the taxpayer stays in one place or moves frequently from place to place • the nature of the accommodation (hotel, motel, long term accommodation) • whether the taxpayer is accompanied by his or her family • whether the taxpayer is maintaining a home at the previous location while away, and • the frequency and duration of return trips to the previous location. TR 98/9 provides examples designed to illustrate factors and circumstances that are relevant in determining whether a taxpayer has established a new home in the new location. No one test will satisfy all circumstances. The question of whether a new home has been established depends on all the facts. In your case, you will be living and working overseas for X months. You will be working for the same employer as in Australia, and will have the use of a workplace in your city of residence overseas. The length of time that you will live overseas and the fact that you have employment there for the X months indicate that you will establish a new home for that period. Therefore, you are not entitled to a deduction for your accommodation or meal expenses while living overseas, as the expenses are not incurred in gaining or producing assessable income. The expenditure is inherently of a private or domestic nature and is not allowable under section 8-1 of the ITAA 1997.

Relevant facts: You are a fulltime employee journalist. | You intend to travel, at your employer's request, overseas for X months to cover an event. | Your travel costs will not be reimbursed, and no travel allowance will be paid. | You have not taken leave to travel overseas and there is no private component to your trip. | You will not be accompanied on your trip overseas. | You will incur expenses incidental and relevant to the producing of assessable income while overseas. | You will keep substantiation in the form of written evidence and travel diaries. | Your employer will continue to pay regular salary into your Australian bank account in Australian dollars. | You will continue to pay rent on your residence in Australia while overseas. | Your employer's location while not change from the Australian address while you are overseas. | It is likely that while overseas you will have to travel to different localities to conduct interviews related to your work. | It is accepted that when working overseas you will be under the direction of your Australian employer. | It is not a condition of your employment that you travel overseas for your work. | Your expenses while overseas will primarily be rented accommodation. | Your place of employment overseas will have a telephone, computer and desk provided. | You will sometimes have to work from your rented accommodation.