Private ruling: Travel expenses
Published: May 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for expenses in travelling to and from clients? | A1: Yes.


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, or a provision prevents you from deducting it. A deduction is only allowable if an expense: § is actually incurred, § meets the deductibility tests, and § satisfies the substantiation rules. A number of significant court decisions have determined that 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, § there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T , (1949) 78 CLR 47), and § it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). Generally a deduction is not 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. However, the Commissioner accepts that expenses incurred in travelling between home and work may be deductible in some limited circumstances. Travel to an alternative place of work may be an allowable deduction if substantial income earning activities are carried out and the alternative place of work is not a regular place of employment. A deduction is allowable for the cost of travel from a person's normal workplace or home to an alternative workplace. The cost of travel from the alternative workplace back to the normal workplace or home is also an allowable deduction (Miscellaneous Tax Ruling MT 2027). This travel is undertaken in the performance of a person's normal duties. It is incurred in the course of gaining assessable income. In your case, you travel to various places to meet clients. This travel is considered to be sufficiently connected to your income earning activities. Therefore the associated taxi expenses are an allowable deduction.

You travel to meetings with clients. | The meetings are at different places. You take a taxi to these meetings. These places are not regular places of work. You undertake substantial work duties at these meetings. | You do not carry any equipment with you. | The travel to clients is sometimes from your regular place of work and at other times from your home. | You have substantiation for your travel expenses.