Private ruling: Deduction - work related travel expenses
Date of advice: 9 September 2016
Published: November 2016
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 30 June 20XX

Ruling: Q1: Are you entitled to claim a deduction for expenses incurred on a vehicle that is under a novated lease? | A1: No. | Q2: Are you entitled to claim a deduction for your expenses for travelling between home and work? | A2: No.

Relevant facts and circumstances: You are employed as a specific surveyor. You are required to transport yourself, work tools and safety equipment to and from jobsites. The work tools and safety equipment include the following: • Orange flashing light for car • safety helmet x 2 • level • gas meter • water proof torch • intrinsically safe torch • small hand torch • square • stamps • punches • vessel documentation files • overalls • over protective suits • high visibility vest • chipping hammer • small hammer • spike • gloves • safety boots • markers • rags • detergent/soap The above equipment is carried in two plastic containers of dimensions 500mmx400mmx330mm. You advise in addition to these items you also carry a back pack with a laptop and documentation. You are required to carry these items with you as you are unable to leave them securely at your main worksite and above that, the items need to remain with you in your vehicle as you are frequently called out to attend jobsites (without notice or prior warning) directly from home after hours and on weekends. You have been provided with a vehicle under a novated lease through your employer to which you receive an allowance for.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1. | Income Tax Assessment Act 1997 section 51AF

Reasons for decision: Summary: You are not entitled to a deduction for expenses incurred in relation to the vehicle that is under a novated lease. The employer is entitled to the deduction for lease expenses where the vehicle is used in the business or provided to an employee as part of a salary packaging arrangement. Therefore you are not entitled to a deduction in relation to travel expenses. | Detailed Reasoning - Novated car lease: Paragraph 25 and 26 of IT 2509 provides the taxation implications for taxpayers who enter into this plan as follows: 25. The employee is not allowed any income tax deductions that he or she might incur on expenses that relate to the car. This is because of the application of sections 51AF and/or 51AH of the Income Tax Assessment Act 1936 (ITAA 1936) 26. Section 51AF of the Income Tax Assessment Act has application where, as in this case, the employer provides a car for the exclusive use of an employee. The section denies any deductions for expenses incurred by the employee in respect of "car expenses" that relate to the car provided. "Car expenses" in this context is defined in subsection 82KT(1) and includes lease rentals, depreciation, interest, registration, insurance, repairs, maintenance and fuel. Accordingly, the employee would not be able to obtain deductions for any expenses incurred that come within the definition of "car expenses", including deductions for any lease rentals paid under the finance lease with the finance company. Taxation Ruling IT 2509 also states: | Detailed Reasoning - For the employee:: • Any payments by the employer under the sublease will be assessable income of the employee, whether paid directly to the employee or to the finance company on the employee's behalf. • The employee will not be entitled to any income tax deductions for any expenses relating to the leased car. • Where there is a novation of the finance lease and the sublease the employee will not be assessed on any sublease rentals and will not be entitled to any deductions for lease rentals. TR 1999/15 states at paragraphs 6 and 7 that: 6. In full novations the lease obligations are transferred to the employer. Accordingly, there are no income tax consequences for the employee during the period when the employer makes the lease payments. 7. The employer in the novated lease is entitled to a deduction for lease expenses where the vehicle is used in the business or provided to an employee as part of a salary packaging arrangement. Due to you being a part of the novated lease arrangement this limits any deductions being claimed by yourself (the employee). Further, there are no income tax consequences for the employee during the period when the employer makes the lease payments. Given the above there is no requirement and it is not relevant to examine the home to work travel exceptions.