Private ruling: Deductions for travel expenses
Date of advice: 3 September 2019
Published: November 2019
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim a deduction for travel expenses on a second home including rates, insurance, repairs, electricity, furniture and electrical appliances? | A1: No. | Q2: Are you entitled to claim a deduction for food? | A2: No.

Relevant facts and circumstances: You are a fly in fly out (FIFO) worker. You reside with your family in City A. Your roster requires that you work two weeks on and then two weeks off. You work in City B. You own a property in City B which you previously lived in before renting it out up until 20XX. While in City B, the original arrangement with your employer allowed you to stay in accommodation supplied by your employer. A new arrangement was made which and you began using the rental property as your own accommodation. Under the new arrangement you are required to pay for your own accommodation and food and in return you receive a Living Away from Home (LAFH) allowance, Living Local Allowance and FIFO Offset.

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. For an expense to be an allowable deduction, it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; (1958) 100 CLR 478 ( Lunney's case )). The receipt of an allowance or the fact that an allowance is not paid does not determine whether an associated expense is deductible. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997. Expenditure on the daily necessities of life 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. Similarly, a deduction is not generally allowable for the cost of travel between home and work as it is considered a private expense. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. Such expenses are incurred as a consequence of living in one place and working in another. That is, the essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction ( Lunney's case and Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616). An exception to this is where you are undertaking work related travel and are required to stay away overnight. However, no deduction is allowable if a taxpayer is merely staying close to their usual work location. Travelling to commence duties at a new work location is not travelling on duty. The contractual duties do not commence until the person reports to work at the new location. This is so whether the transfer is voluntary or at an employer's request. When relocating to a new work site, a taxpayer is not travelling on their work, but is travelling to their work. Therefore any associated travel, accommodation or meal expenses incurred are not regarded as deductible work related expenses. Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless a person arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney's case and Case V111 88 ATC 712). The essentially private character of travel between home and work is not affected by factors such as the mode of transport, the availability of transport, the lack of suitable public transport, the erratic times of employment, the time of travel, the distance of travel and the necessity of travel (Taxation Ruling IT 2543). Taxation Ruling TR 2017/D6 paragraph 54 provides that there may be some instances where these expenses may be considered to be incurred in the course of performing an employee's duties but only where: the employee's work activities require them to undertake the travel a) the work requires the employee to sleep away from home overnight b) the employee has a permanent home elsewhere, and c) the employee does not incur the expenses in the course of relocating or living away from home. In your case your travel to City B is not considered to be work related travel. It is considered that City B is your normal place of work. While it is acknowledged that your main residence is in City A, it is not considered that your travel between City A and City B is work related travel. Rather, it is private travel carried out to enable you to commence your employment duties. The distance of the travel does not alter the private nature of the travel. That is, you were not away from home overnight for work purposes, as City B is your work base for the period of the roster. As City B is your normal place of work, your travel, accommodation and meal expenses are not associated with any work related travel. Similarly, any incidental expenses incurred in relation to your travel to and from City B and/or living in City B, are not incurred during the actual performance of your work, that is, during the production of assessable income. The meals and accommodation expenses incurred while living and working in City B are a private expense and no deduction is allowable under section 8-1 of the ITAA 1997.