Private ruling: Travel and accommodation expenses
Date of advice: 25 January 2017
Published: July 2017
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2015

Ruling: Questions and Answers | 1. Are you entitled to a deduction for expenses incurred in travelling between your home in City A and your rented accommodation in City B? | No | 2. Are you entitled to a deduction for expenses incurred in travelling between your rented accommodation in City B and your employment at Council C? | No | 3. Are you entitled to a deduction for accommodation and utility expenses, such as electricity, incurred in staying at your rented accommodation in City B? | No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a Council employee. You receive your remuneration from a company called Company D. Company D engages individuals on a contract basis to fill temporary positions in local government councils. The contract periods vary from 3 months to 6 months. It is customary for the Council to provide accommodation to the person supplied by Company D. Accommodation is not provided in major cities such as City B. In the 2015-16 income year you undertook a six month contract to work at Council D in City B. The contract has been extended for several months. You have a home in City A. You have taken out a lease on a property in City B for the duration of the contact. You incur expenses including electricity. You travel between City A and City B. You travel about 50kms in your personal vehicle between your rented accommodation in City B and your employment at Council C. You do not receive any travel or accommodation allowance from Company D.

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. | Detailed Reasoning - Home to work travel: A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties (Taxation Ruling TR 95/34 paragraph 77). However, there are situations where it has been accepted that travel by employees from home to work is deductible. Taxation Ruling IT 2543 summarises these situations as follows: (a) the taxpayer's home constitutes a place of employment and travel is between two places of employment or business (b) the taxpayer's employment can be construed as having commenced before or at the time of leaving home (c) the taxpayer has to transport by vehicle bulky equipment necessary for employment (d) the taxpayer's employment is inherently of an itinerant nature (e) the taxpayer is required to break his or her normal journey to perform employment duties (other than including incidental duties such as collecting newspapers, mail, etc.) on the way from home to the usual place of employment, or from the place of employment to home. In your case: ● your home is not a place of employment ● your employment does not commence at the time of you leaving home ● you are not required to transport bulky equipment to your employment ● your employment is not of an itinerant nature; that is, your work location is fixed at Council C for a significant period (six months which has been extended for a further period) and there is no continual travel once you commence work, and ● you do not break your journey for work purposes when travelling to and from your employment. The circumstances in your case are similar to those in Case V111 88 ATC 712, where a taxpayer worked as a labourer at a power station site located approximately 400 km from his home. Each Monday the taxpayer departed his family home and travelled by car directly to the work site, and commenced the return journey on the following Saturday. During the week the taxpayer resided in employer provided accommodation at a camp near the work site. In his judgment, P.M. Roach (Senior Member) stated at p 714: ... nothing in High Court decisions turns on the significance of the length of distance travelled (even 400 kms each way) or the frequency of such travel (once per week each way). Although the High Court accepted that incurring the expense was a necessary prerequisite to the earning of income, it none the less held that the expenses of getting to and from work were not expenses incurred -"in the course of" deriving income by working. Therefore, the expenses you incur when travelling between your home in City A and your place of accommodation in City B are not deductible as they are of a private nature. The expenses you have incurred are as a result of living in one place and working in another. Also the expenses you incur when travelling between your City B accommodation and your employment at Council C are not deductible as they constitute travel to and from work. The expenses are incurred to put you in a position to perform your duties of employment, rather than in the performance of those duties. | Detailed Reasoning - Accommodation expenses: Generally, accommodation expenses incurred by an employee who lives away from home to carry out the duties of his or her employment will not be deductible. Expenses of this nature have been found to be private or incurred before or after the activity of earning assessable income. Where it has been established that a property used to accommodate a taxpayer amounts to a second residence, the Courts and the Administrative Appeals Tribunal have consistently held that the essential character of the expenses incurred is of a private or domestic nature unconnected with income-producing activities and, therefore, the expenses are not deductible. See Case X4 90 ATC 116; AAT Case 5,545 (1989) 21 ATR 3120 ( Case X4 ). In Case X4 , Senior Member Beddoe (at ATC 118; ATR 3122) found, on the facts, the overall picture painted by the applicant's evidence is that he was intent on creating a home away from home. He did not wish to stay in hotels and preferred to have his own premises with his own facilities, books etc. The essential character of the house was that of a second home. This view is further supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466, 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 your case, we acknowledge that you incur additional living and utility expenses as a result of your lease on your property in City B. However, your accommodation expenses are of a private and domestic nature, which are incurred to enable you to work at Council C. They are not incurred during the actual performance of your work, that is, during the production of assessable income, and as such are not deductible under section 8-1 of ITAA 1997. | Detailed Reasoning - Conclusion: You are employed on a contract basis to work at Councils. Your current contract is near City B at Council C. You do not receive a travel or accommodation allowance. You travel between your home in City A and your rented accommodation in City B. Your employment at Council C is about 50km from your City B accommodation. You are not entitled to a deduction for the travel expenses between your City A home and your accommodation in City B or your travel expenses between your City B accommodation and your employment as the expenses are of a private nature. Your City B accommodation expenses, including, electricity are also of a private nature and thus not deductible.