Private ruling: Accommodation and meal expenses
Date of advice: 12 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for expenses you incur for your accommodation and meals? | A1: No.

Relevant facts and circumstances: You are required to live near your worksite. Due to travel access limitations you are unable to live in nearby areas. You have deductions for your meals and accommodation deducted from your pay before you receive your wage. This is an automatic deduction regardless of whether the meals are consumed or if you use the accommodation provided.

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 outgoings to the extent to which they are incurred in gaining or producing assessable income, provided they are not of a capital, private or domestic nature, or incurred in the gaining of exempt income. Generally, accommodation and meal expenses will not be deductible. Expenses of this nature have been found to be private, or incurred before or after the activity of earning assessable income. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility. In Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166 the Full High Court laid down the principle that for a deduction to be allowable it is not enough for the expenditure to be an essential prerequisite to the derivation of assessable income. In that case it was held that the costs incurred by a taxpayer in travelling to the place where they work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income. You have incurred accommodation and meal expenses as a result of being required to live near your workplace. These expenses were incurred in order to stay in proximity to your work location and arrive at work on time. They are a prerequisite to the earning of assessable income and not an expense incurred in the course of gaining and producing that income. While we acknowledge that your accommodation and meal expenses are automatic and compulsory, they lack the required connection to the performance of your duties. Accordingly, they are seen to be of a private and domestic nature, and as such are not deductible under section 8-1 of ITAA 1997.