Private ruling: Work related deductions
Date of advice: 6 June 2023
Published: 31 July 2023
Ruling period: Year ended 30 June 2022 | Year ending 30 June 2023
Date scheme commenced: 1 July 2021

Ruling: Q1: Are you entitled to a deduction for home to work travel for transporting your work equipment? | A1: No.

Relevant facts and circumstances: You work for Employer Z. You are required to carry personal protective equipment between home and work. It weighs several kilograms. The equipment contains personal identifying information that represents a potential security risk. The equipment is required each shift to perform the job. There is no ability to leave the equipment at work in secure storage as your employer in relevant income year does not provide secure storage for the equipment at the work location. The employer has advised the staff that due to the nature of their work and the security risk involved they are advised to travel to and from work in a private vehicle and whilst carrying the equipment.

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. | Detailed Reasoning - Travel Expenses: In considering the deductibility of travel expenses, a distinction is made between travel to work and travel on work. It is only if the duties of the job require a taxpayer to travel that the taxpayer's expenses can be deducted. A deduction is generally not allowable for the cost of travel by an employee between their home and their normal workplace as it is considered private in nature. The cost of such travel is generally incurred to put the employee in a position to perform their duties of employment, rather than in the performance of those duties (paragraph 77 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses and paragraphs 21 to 23 of Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses?). Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The reasons given by the High Court were twofold. The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income. The essential character of the travel to and from 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 what distance from work. An exception to the deductibility of home to work travel is where a taxpayer's work is itinerant. The Commissioner's view as regards to when a taxpayer's work would be considered itinerant is contained in Taxation Ruling TR 95/34. Paragraph 7 of TR 95/34 sets out the following characteristics as being indicators of itinerancy: (a) travel is a fundamental part of the employee's work; (b) the existence of a 'web' of workplaces in the employee's regular employment, that is, the employee has no fixed place of work; (c) the employee continually travels from one work site to another; (d) other factors that may indicate itinerancy (to a lesser degree) include: (i) the employee has a degree of uncertainty of location in his or her employment (that is, no long-term plan and no regular pattern exists) (ii) the employee's home constitutes a base of operations (iii) the employee has to carry bulky equipment from home to different work sites (iv) the employer provides an allowance in recognition of the employee's need to travel continually between different work sites. Whilst the above characteristics are not exhaustive, they provide guidelines for determining whether an employee's work is itinerant. It is considered that no single factor on its own is necessarily decisive. A deduction may also be allowable for the cost of travel between home and work for an employee who is required to transport bulky equipment. Paragraphs 79 and 81 of Taxation Ruling TR 2021/1 explain that a deduction may be allowed under this narrow exception where: • the equipment is essential for the performance of the employee's employment duties • the equipment is bulky such that transportation by car or other private vehicle is the only realistic option and • transporting the items to and from their regular place of work is a practical necessity because there is no secure area for the storage of the equipment provided at the employee's regular place of work or the equipment needs to be transported to a different site each day. However, if equipment is transported by the employee as a matter of mere convenience or personal choice, the transport costs are private, and no deduction is allowable. The question of what constitutes 'bulky' equipment must be considered according to the individual circumstances in each case. In FC of T v. Vogt 75 ATC 4073, 5 ATR 274 (Vogt's Case), the taxpayer was a professional musician who used his vehicle to transport bulky musical instruments and associated equipment from his home to his places of employment. It was found in Vogt's Case that the taxpayer was entitled to a deduction for home to work travel expenses as he was using his vehicle for work related purposes to transport bulky equipment. In Crestani v. FC of T 98 ATC 2219; (1998) 40 ATR 1037 (Crestani's Case), Senior Member J Block was of the opinion that the term 'bulky' should not be construed to refer only to an article of large size, such as the musical instrument subject to the decision in the Vogt's Case, but should be more aptly construed as similar to 'cumbersome' in the sense that it is not easily portable. In Crestani's Case, the tribunal was of the opinion a toolbox was 'bulky'; it was not easy to lift and could not be carried for any distance. The toolbox measured 57 cm x 28 cm x 25 cm (that is, having a volume of about 0.04 cubic metres) and weighed 27 kg. The toolbox was considered as 'bulky', in the sense of 'cumbersome', and the transport cost was 'attributable' to the transportation of such bulky equipment rather than private travel between home and work. The employer did not provide a secure storage area for the toolbox and the use of public transport was not a viable option. Conversely, in Case 43/94 94 ATC 387, a flight sergeant with the Royal Australian Air Force was denied a deduction for the cost of transporting his flying suit and other items used for work purposes. These items were carried in: • a duffle bag measuring 75 cm long, 55 cm wide, 50 cm deep and weighing 20 kilograms when packed • a suit bag which weighed 10 kilograms when packed, and • a briefcase-sized navigational bag which contained charts, work manuals and study materials. It was held that the mode of transporting the items was simply a consequence of the means adopted by the taxpayer to convey him to work. It was considered that the duffle bag was not of sufficient size or weight to impede transport. Application to your circumstances : You travel from your home to your workplace. You carry personal protective equipment. You travel by private car to the work site. You have incurred expenses for travel between your home and your work. This travel is incurred in order to put you in a position to perform your duties of your employment; it is not incurred in the performance of the duties of your employment. According to the information provided to us you are not an itinerate worker as you do not have a number of work sites that you visit. The equipment you carry to be able to do your work is not considered to be bulky; it is reasonably portable. The case of Crestani may be distinguished from the facts here. In this case, the taxpayer was an aircraft engineer who worked at Sydney Airport. They transported their toolbox home at the end of each shift as there was no secure storage at work. The Tribunal held that the home to work travel was attributed to the transportation of these tools and the expenses incurred in transporting these tools were deductible. The equipment is not heavy. The facts here are more closely aligned to Case 43/94, so that the mode of transporting the items was simply a consequence of the means adopted by you to convey yourself to work. In terms of the requirements for the bulky items exception in Taxation Ruling TR 2021/1 at paragraphs 79 to 81, the conditions for the exception are not satisfied on the facts: • It is accepted that the equipment is essential for the performance of your employment duties; • transporting the equipment to and from your regular place of work is a practical necessity because there is no secure area for the storage of the equipment provided at your regular place of work for the relevant years. • However, as noted above, the equipment is not bulky such that transportation by car or other private vehicle is the only realistic option You are therefore not entitled to a deduction for your home to work travel.