Private ruling: Travel and accommodation expenses
Published: July 2011
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2010

Ruling: Q1: Is a deduction allowable for the travel and accommodation expenses that you incur in order to work in one location, when your family home is in another location? | A1: No.

Relevant facts and circumstances: Your family home is in one location, and your place of work (office) is in another location. You travel from your home to the location where your office is situated every week, except when you are on annual leave. You incur expenses in travelling between home and the location where you work each week (including air, train and bus fares) and for accommodation in the location where you work. You have receipts and bank records of rent payments to substantiate these expenses. You do not receive a travel allowance and are not reimbursed for any of the expenses incurred.

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

Reasons for decision: Summary: The expenses in travelling between your home in one location and place of work in another location, and for accommodation to enable you to stay in the location of your work, are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income. Furthermore, the expenditure is of a private or domestic nature. A deduction is therefore not allowable for your travel and accommodation expenses. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for an outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the outgoing is of a capital, private or domestic nature. You believe that your travel and accommodation expenses are incurred in earning assessable income. However, certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney v. FC of T (1958) 100 CLR 478 ( Lunney's Case )). In Lunney's Case 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. Williams, Kitto, and Taylor JJ stated (at pages 498 - 499): It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income. The issue of expenses incurred for travel to, and accommodation near, the work place while maintaining a family residence in another location has been considered in a number of cases. Some of these cases are discussed below. In Re Williamson and FC of T [2006] AATA 1507; 64 ATR 1264 ( Williamson's Case ), the taxpayer lived in Sydney but accepted a job working in Canberra. His family remained living in Sydney and the taxpayer commuted to Canberra for the purposes of his employment. He lived in rented accommodation in Canberra during the week and returned home to Sydney on weekends. The taxpayer incurred motor vehicle expenses in travelling between his job in Canberra and home in Sydney. It was held that Lunney's Case applied, and that the travel expenses incurred by the taxpayer in travelling between home and work were not deductible. In FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms' Case ), the taxpayer was a forest worker who during the working week lived in a caravan in a bush camp 108 kilometres from his family home in Grafton. He claimed it was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the camp. He would return home on weekends. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible. | Detailed Reasoning - Your travel and accommodation expenses: In your case, the expenses that you incur in travelling between your family home in one location and place of work in another location, and for accommodation to enable you to stay in the location of your work, are incurred in order for you to be in a position to be able to derive assessable income from your work in the other location. The expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income. Further, the expenditure is private or domestic in nature as it arises due to your choice of where to live. That is, as you have chosen to reside and have your family home at a place which is some distance from where it is necessary for you to be in order to gain your income. A deduction is therefore not allowable under section 8-1 of the ITAA 1997 for the expenses that you incur in travelling between your home in one location and your job in the other location, and for accommodation in the other location.

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