Private ruling: Travel e xpenses
Date of advice: 9 April 2019
Published: May 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 01 July 2017

Ruling: Q1: Are you entitled to a deduction for your car expenses for travelling between two work locations where one of them is your home? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Division 28 | Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 25-100 Reason for Decision | All of the legislative references that follow are to the Income Tax Assessment Act 1997 . Division 28 specifically deals with deductions for car expenses. In order to be eligible to claim a deduction for car expenses, Division 28 requires that there be ‘business kilometres’. | ‘Business kilometres’ are defined in subsection 28-25(3) to be kilometres the car travelled in the course of: | (a) producing your assessable income; or | (b) your ‘travel between workplaces’. | Travel between workplaces | Section 25-100 provides the definition of ‘travel between workplaces’. | Subsection 25-100(3) states: | Travel between 2 places is not travel between workplaces if one of the places you are travelling between is a place at which you reside. | In your case, you are querying the travel between your home where you undertake work and a location where you work as an independent contractor. | As you reside at one of these places, this travel is specifically excluded from being ‘travel between workplaces’ by subsection 25-100(3). | Therefore, we must determine whether your travel is ‘in the course of producing your assessable income’. | In the course of producing your assessable income | The courts have held that a deduction is generally not allowable for the cost of travel between home and work as it is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income ( Lunney and Hayley v. FCT (1958) 100 CLR 478). | There are limited situations where the cost of travel between home and work is considered to be incurred in the course of producing assessable income. One such situation is where the cost of the travel can be attributed to the transportation of bulky equipment. | In your case, you transport a small number of items for your work. It is considered that these items would not be particularly difficult to transport and would not constitute bulky equipment. | Another situation that is an exception to the general rule is where the home, or part of the home, is a base of business operations. This exception is discussed in Taxation Ruling IT 2199 which provides examples such as house painters, plumbers, electricians and medical practitioners who conduct practices from surgeries located at their homes (such as in Garrett v. FC of T 82 ATC 4060; 12 ATR 688). | In your case, you have worked as an independent contractor for Entity A and Entity B at their premises. Although you consider that work to be part of your business, apart from the type of services being the same, that work is quite distinct from the business you carry on at home. | The clients you see at your home would see themselves as customers of your business. Although, Entity A and Entity B have engaged you as an independent contractor rather than an employee, the clients you see there would not be aware of this; they would just know that you work for those two businesses. They pay Entity A and Entity B and would see themselves as customers of Entity A and Entity B. | Unlike in the examples provided in IT 2199, it is not considered that your home would be a base of operations with respect to your work at Entity A and Entity B. Although you may undertake some tasks at home in relation to that work, such as reviewing notes and checking if you have been paid correctly by Entity A and Entity B, these tasks would be considered incidental. | When you work at Entity A and Entity B, it is not considered that you are continuing work that you started at home. That is, when you travel to Entity A and Entity B you are not considered to be travelling ‘on work’. Rather, you are travelling ‘to work’. That is, it is considered that you only commence your work for Entity A and Entity B after you arrive there. Also, it is not considered that your work for Entity A and Entity B continues for them after you leave their premises when you travel home and are at home. | It is also noted that in the income year that you are requesting the private ruling for (that is, 2017-18), you only saw on average approximately one client per week. Where you see one client a week from home for just over an hour, it is difficult to view travel between your home and Entity A and Entity B as travel from a base of business operations. | In summary, it is considered that your travel between your home and Entity A and Entity B is travel ‘to work’ rather than travel undertaken in the course of producing your assessable income. Consequently, your car expenses for this travel is not deductible.

Reasons for decision: Summary: All of the legislative references that follow are to the Income Tax Assessment Act 1997 . Division 28 specifically deals with deductions for car expenses. In order to be eligible to claim a deduction for car expenses, Division 28 requires that there be ‘business kilometres’. ‘Business kilometres’ are defined in subsection 28-25(3) to be kilometres the car travelled in the course of: (a) producing your assessable income; or (b) your ‘travel between workplaces’. | Detailed Reasoning - Travel between workplaces: Section 25-100 provides the definition of ‘travel between workplaces’. Subsection 25-100(3) states: Travel between 2 places is not travel between workplaces if one of the places you are travelling between is a place at which you reside. In your case, you are querying the travel between your home where you undertake work and a location where you work as an independent contractor. As you reside at one of these places, this travel is specifically excluded from being ‘travel between workplaces’ by subsection 25-100(3). Therefore, we must determine whether your travel is ‘in the course of producing your assessable income’. | Detailed Reasoning - In the course of producing your assessable income: The courts have held that a deduction is generally not allowable for the cost of travel between home and work as it is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income ( Lunney and Hayley v. FCT (1958) 100 CLR 478). There are limited situations where the cost of travel between home and work is considered to be incurred in the course of producing assessable income. One such situation is where the cost of the travel can be attributed to the transportation of bulky equipment. In your case, you transport a small number of items for your work. It is considered that these items would not be particularly difficult to transport and would not constitute bulky equipment. Another situation that is an exception to the general rule is where the home, or part of the home, is a base of business operations. This exception is discussed in Taxation Ruling IT 2199 which provides examples such as house painters, plumbers, electricians and medical practitioners who conduct practices from surgeries located at their homes (such as in Garrett v. FC of T 82 ATC 4060; 12 ATR 688). In your case, you have worked as an independent contractor for Entity A and Entity B at their premises. Although you consider that work to be part of your business, apart from the type of services being the same, that work is quite distinct from the business you carry on at home. The clients you see at your home would see themselves as customers of your business. Although, Entity A and Entity B have engaged you as an independent contractor rather than an employee, the clients you see there would not be aware of this; they would just know that you work for those two businesses. They pay Entity A and Entity B and would see themselves as customers of Entity A and Entity B. Unlike in the examples provided in IT 2199, it is not considered that your home would be a base of operations with respect to your work at Entity A and Entity B. Although you may undertake some tasks at home in relation to that work, such as reviewing notes and checking if you have been paid correctly by Entity A and Entity B, these tasks would be considered incidental. When you work at Entity A and Entity B, it is not considered that you are continuing work that you started at home. That is, when you travel to Entity A and Entity B you are not considered to be travelling ‘on work’. Rather, you are travelling ‘to work’. That is, it is considered that you only commence your work for Entity A and Entity B after you arrive there. Also, it is not considered that your work for Entity A and Entity B continues for them after you leave their premises when you travel home and are at home. It is also noted that in the income year that you are requesting the private ruling for (that is, 2017-18), you only saw on average approximately one client per week. Where you see one client a week from home for just over an hour, it is difficult to view travel between your home and Entity A and Entity B as travel from a base of business operations. In summary, it is considered that your travel between your home and Entity A and Entity B is travel ‘to work’ rather than travel undertaken in the course of producing your assessable income. Consequently, your car expenses for this travel is not deductible.

Relevant facts: You work in a particular field. | You have an ABN and started to operate a business from home during the 2017-18 income year. | You have a room set aside which is fully equipped for the work you do. | You are also engaged as a contractor by Entity A to do the same type of work you undertake at home. | Under the terms of your agreement with Entity A, you are not entitled to annual leave, sick leave, superannuation, workers compensation, or termination benefits. You are paid for the clients that you see, less a XX% service fee, plus GST. If a client does not attend then you are not paid. | Your work for Entity A is undertaken at their premises. | You spend approximately half a working week working for Entity A. | For the 2017-18 income year you saw approximately one client per week at home with each session taking just over an hour. Since then the number of clients you see at home has increased. | You have also provided the same type of services for Entity B at their premises as an independent contractor. | You have provided your ABN to both Entity A and Entity B. | You are not registered for GST and therefore do not lodge activity statements. | There is no business name or advertising for your business outside your home. | You advertise your business through having a Facebook page and Instagram. | When you work as an independent contractor you transport a small number of items you use for your work. | You consider your work for Entity A and Entity B to be part of your business.