Private ruling: Accommodation expense
Published: May 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for accommodation expenses incurred while attending an alternative workplace? | A1: No

Relevant facts and circumstances: Your usual place of work is in Place A. You are required to attend an alternative workplace, Place B, at various times throughout the year. The distance between your residence and Place B is less than 25 kilometres. Your work in Place B usually finishes late in the evening and then you then attend work again early the next morning. Due to your workload at Place B you pay for accommodation close to Place B rather than driving home. You do not receive an allowance for travel and accommodation for work in Place B. You believe working long hours at Work B and traveling to Place B from you residence would raise fatigue and safety issues. For this reason you would incur the accommodation costs regardless of whether the accommodation was deductible or not.

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, or relate to the earning of exempt income. 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 these expenses are incurred is not determinative of deductibility. The expenses are a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 7 AITR 166; 77 ATC 4076). The issue of expenses incurred in relation to accommodation near the workplace while maintaining a family residence in another location was considered in the cases of Federal Commissioner of Taxation v. Toms 89 ATC 4373: (1989) 20 ATR 466 (Toms' Case ) and Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 ( Charlton's Case ). These cases established that accommodation expenses incurred by an individual who lives away from home to carry out the duties of their employment will not be deductible. Expenses of this nature were found to be private in nature and incurred before or after the activity of earning assessable income. In Charlton's Case , the taxpayer was a pathologist employed to carry out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo in order to avoid excessive travelling and fatigue, while maintaining a permanent family home in Melbourne, located approximately 150 kilometres away. The taxpayer claimed that the rental was incurred in the production of assessable income, but the Court ruled that the expense of accommodation was considered private and domestic in nature and would not be deductible under section 8-1 of the ITAA 1997. Similarly, the Federal Court in Toms' Case 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. These expenses were dictated not by work but by private considerations. Therefore the essential character of the expenditure was considered to be of a private or domestic nature. In your case, you have incurred accommodation expenses to work away from home due to time constraints from long work hours. The expenses you incurred are a prerequisite to the earning of your assessable income. They were incurred in order to enable you to earn income but were not incurred in the course of actually gaining or producing that income. The fact that you believe there to be fatigue and safety issues should you travel home does not change the private character of the expenses. The accommodation expenses are considered to be of a private or domestic nature. Therefore, you are not entitled to a deduction for the accommodation expenses under section 8-1 of the ITAA 1997.