Private ruling: travel expenses
Published: May 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 January 2012

Ruling: Q1: Are you entitled to a deduction for flights when you travel to and from city B to attend work? | A1: 

Relevant facts and circumstances: You operate a transport business in city A as a sole trader. You entered into a contractual agreement with a company. The agreement requires that you work out of city B on a 3 weeks on and 2 weeks off basis. As part of the agreement you are responsible for all airfares associated with the provision of your services. You incur expenditure on airfares each month to attend work in city B. You are not required to carry any equipment or tools when travelling. You are required to travel between various sites within the region surrounding city B in order to meet the requirements of your contractual arrangements. You undertake all invoices, quotations and contract arrangements from your normal business base in city A which is also your principal place of residence.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 and | Income Tax Assessment Act 1997 section 25-100.

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. Generally, expenditure in travelling between a taxpayer's home and place of work is of a private nature and is accordingly excluded as a deduction under section 8-1 of the ITAA 1997. Only in certain circumstances is such travel deductible. Section 25-100 of the ITAA 1997 provides that a taxpayer can claim expenditure to the extent that it is incurred for travel between workplaces. Subsection 25-100(2) of the ITAA 1997 states that the travel has to be direct between two places and to the extent that while at the first place you were engaged in activities to gain or produce assessable income and the travel is for the purpose of engaging in activities at the second place to gain or produce assessable income. However, subsection 25-100(3) of the ITAA 1997 specifies that travel between two places is not travel between workplaces if one of the places you are travelling between is a place at which you reside. 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 circumstances do not correspond with any of the above situations and one of the locations you travel from is the place where you reside. The costs you have incurred for airfares to travel between your home and your workplace are considered to have been incurred for travel between home and work. These expenses are a prerequisite to the earning of your assessable income and are not incurred in producing that income. Therefore, the costs you have incurred are as a consequence of living in one place and working in another and were incurred to enable you to commence, or return home after completing, your income earning activities. Furthermore, as one of the locations is one where you reside, subsection 25-100(3) of the ITAA 1997 specifically states that the travel is not between two workplaces. These expenses are considered private in nature and are not deductible.

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