Private ruling: Work Related Expenses - Relocation Costs
Date of advice: 20 February 2017
Published: August 2017
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the expenses for relocating to commence a new work contract with your existing employer be an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Will the rent expense for a residential property in which you live be an allowable deduction under section 8-1 of the ITAA1997? | A2: No. | Q3: Will the cost of mowing the lawn of your previous residence be an allowable deduction under section 8-1 ITAA 1997 whilst performing the new contract for your existing employer in another location? | A3: No.

Relevant facts and circumstances: You were working for your employer when your contract ended. Your employer offered you a choice of either a redundancy or a new work contract in another location. You chose to accept the new work contract in another location. You relocated to the other location to commence the new work contract. You incurred relocation expenses including travelling costs; transportation of household furniture and personal effects; utility connection fees and service charges (excluding usage charges) for water, electricity, gas, telephone and internet. You are currently renting an apartment as your residence whilst working the new location and incur ongoing rental costs. You have kept your previous property and continue to pay maintenance costs for the untenanted property.

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

Reasons for decision: Summary: The expenses that you have incurred in relocating to another location to commence work are not an allowable deduction, as they occur prior to gaining assessable income and are classed as a private activity. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the ITAA 1997 provides that you can deduct any loss or outgoing that is incurred in gaining or producing your assessable income. However, you cannot deduct a loss or outgoing if it is of a private or domestic nature. Travel, relocation and removal expenses of an employee to obtain a new position are generally not allowable deductions because the expenses are not incurred in gaining or producing assessable 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. In general, all relocation expenses are a prerequisite to the earning of income in the same manner as are travel expenses to and from work. Such expenses put you in a position where you can earn income, but they happen at a point too soon to be regarded as being incurred in the course of gaining or producing assessable income ( FC of T v. Maddalena (1971) 2ATR 541; (1971) 45 ALJR 426; 71 ATC 4161). These expenses are not deductible regardless of whether you are commencing a new employment or transferring within an existing employment. 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 you are not travelling on work, but to work. In your case, you have chosen to relocate to another location to commence a new contract of work. Such relocation expenses are considered to be travel to work expenses and are not deductible, as they occur at a point too soon. Further, the expenses incurred in maintaining a residence in the new location and those associated with your previous residence are expenses that are of a private or domestic nature and are not deductible. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility. There is not a sufficient connection between the expenses you have incurred and the generation or production of assessable income in order for them to be an allowable deduction. Therefore, you are not entitled to deduction under section 8-1 of the ITAA 1997 for the expenses that you have incurred in relocating to another location, renting new premises in that new location or maintaining your previous premises.