Private ruling: Deductibility of accommodation and meal expenses
Date of advice: 24 September 2020
Published: November 2020
Ruling period: Financial year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim a deduction for accommodation and meal expenses you incurred due to being unable to return to your home because of COVID-19 state border closures? | A1: No.

Relevant facts and circumstances: You live in State A. You are employed to work at a location near in a different state, on an alternative week roster. Your normal procedure is to fly at your own expense from your home to the other state to commence your work duties, and at the end of your rostered on period, return to your home for a period of time. Because of COVID-19 related state border closures, you have been unable to return to your home at the end of your roster as you would then not be allowed to return to State B where you work. Your only option to continue working was to pay for hotel accommodation and meals in State B during your rostered off period.

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 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. Taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? (TR 2017/D6) sets out general principles for determining whether an employee can deduct travel expenses under section 8-1 of the ITAA 1997. A travel expense includes airfares, accommodation, meal and incidental expenses (paragraph 2 of TR 2017/D6). As a general rule, expenditure for accommodation is of a private or domestic nature and not deductible. This includes the ordinary costs of maintaining a home and consuming food and drink to go about your daily activities, such as to attend work. These costs are preliminary to the work and are not incurred in the course of performing those activities (paragraph 51 of TR 2017/D6). Likewise, where accommodation expenses are incurred by an employee in living away from home to work, they are preliminary to the work and not deductible (paragraph 52 of TR 2017/D6). The private or domestic nature of these expenses often reflects a choice the employee has made. This includes an employee's choice about where to live (paragraph 53 of TR 2017/D6). The issue of expenses incurred for accommodation near the workplace while maintaining a family residence in another location was considered in FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms' Case ). In that case, a forest worker lived in a caravan in a bush camp near his workplace during the week and returned home on weekends. 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. The Federal Court 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 were therefore not deductible. Your circumstances are comparable to the taxpayer in Toms' case . You have made the choice to live in State A and take up employment in State B. Your accommodation and meal expenses in State B arise from this choice, not from your employment. The expenses are a prerequisite or preliminary to your work and put you in a position to perform your employment duties rather than in performing those duties. Your accommodation and meal expenses in the alternative state are private in nature and not deductible. It is acknowledged that you could not return home because of COVID-19 state border restrictions, and it is for this reason you incur the additional travel expenses; however, this does not change the inherent private nature of the expenses. There is no discretion available to the Commissioner to allow deductions for expenses of a private nature that are incurred where someone cannot return home after their roster due to unforeseen circumstances.