Private ruling: Deduction - work related travel expenses
Date of advice: 4 October 2016
Published: November 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 30 June 2015

Ruling: Q1: Are you entitled to claim a deduction for expenses incurred in travelling between home and a work site location where your work equipment will be used ? | A1: Yes. | Q2: Are you entitled to claim a deduction for expenses incurred in travelling between home and a work location where work equipment will not be used ? | A2: No.

Relevant facts and circumstances: You are employed as a surveyor. You are required to transport yourself, work tools and safety equipment to and from the work office and jobsites. You work at various worksites attending to vessels. 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 are required to provide your own vehicle which you are paid an allowance for. This vehicle is not under a novated lease. You need to ensure that you are available for work at all times and be available to attend jobsites at short notice from home or from the office.

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

Reasons for decision: Summary: As you are required to transport bulky equipment to worksites in the course of your employment , you are entitled to claim a deduction for those expenses incurred under S 8-1(1)(a) of the ITAA 1997. However, your travel between your home and work office is not deductible as these expenses are considered to be incurred by you in putting yourself in a position where you can commence performing your duties, rather than in the performance of those duties. This is because the travel is to get you to work not in relation to the carriage of the bulky work equipment. Therefore, you are entitled to claim a deduction for the travel expenses incurred when travelling directly from home to the worksites or from the work office to the worksites and home thereafter. However the expenses incurred to travel to the work office is considered private and as a result you are not entitled to a deduction for that travel. Please be mindful of this when calculating your work related travel deductions for your income tax return. | Detailed Reasoning - Work related travel expenses: Generally the expenses of travel to and from work are not deductible. This is either because such expenditure is private in nature, or because it is not an expense incurred in gaining or producing assessable income. Exceptions to this normal rule can be obtained from Taxation Ruling TR 95/34. Relevant to your situation expenses incurred by employees in travelling to and from work are deductible in certain circumstances. One of the exceptions is where the employee is required to transport bulky equipment necessary for employment. In the case of bulky equipment, the cost is attributed to the transportation of the bulky equipment rather than private travel between home and work where the transportation of the equipment is essential, and is not done as a matter of personal choice or convenience and there is no secure storage provided at the workplace. In your circumstances, it is accepted that your equipment is sufficiently bulky and your travel between home and worksites is attributed to the carriage of your work equipment. You are therefore entitled to a deduction for the cost of this travel. | 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.