Private ruling: Deduction - Work-related expenses
Date of advice: 26 August 2016
Published: October 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim a deduction for accommodation expenses incurred as a result of your employment? | A1: No.

Relevant facts and circumstances: You are employed in other towns and cities in the construction industry. You worked away from home and returned home at every opportunity available. Your employer is not based in your home town. Your employer will send you to sites around Australia where jobs are required. Whilst working away from home you stayed in accommodation, which you were required to pay for.

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

Reasons for decision: Summary: You are not entitled to a deduction for the accommodation expenses incurred as a result of your employment, as they are considered a private expense. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 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. The essential character of travel between home and work is that of a private and domestic nature, related to personal and living expenses as part of the taxpayer's choice of where to live, in choosing to live away from and at what distance from work. As a general rule, expenditure on accommodation while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility. In FC of T v. Toms 89 ATC 4373;(1989) 20 ATR 466 the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations. The taxpayer's meals, accommodation (running and depreciation expenses associated with the caravan, plus interest paid on the loan used to acquire the caravan) and incidental expenses do not have a sufficient connection with his income producing activities. The extra expenses of food and accommodation are considered to be of a private and domestic nature as a taxpayer chooses the location of their normal place of residence. Application to your circumstances In your case, the expenses you have incurred in relation to accommodation are not considered to be incurred in the course of undertaking your income earning activities. Rather the expenses are incurred by you in putting yourself in a position where you can commence performing your duties, rather than in the performance of those duties. As such, the expenses you incur for your accommodation are private in nature. Therefore, you are not entitled to a deduction for these expenses under section 8-1 of the ITAA 1997. The fact that you receive an allowance does not give you an entitlement to claim a deduction for those expenses. The accommodation costs incurred by you are to put yourself in a position to earn income, so are considered a private expense.