Private ruling: Travel expenses
Published: June 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for the accommodation, meals and incidental expenses incurred while working in City B? | A1: No | Q2: Are you entitled to a deduction for the cost of travelling to and from City B? | A2: No.


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 outgoings to the extent to which they are incurred in gaining or producing assessable income. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature. Second work location In Lunney v. FC of T (1958) 100 CLR 478 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. A deduction is generally not allowable for the cost of transport by an employee between home and his or her normal work place as it is generally considered to be a private expense. The cost of travelling between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties. In your case, you incur expenses to travel between your home in City A and City B, in order to attend work for one week in every four. This second work location is a regular place of employment and travelling to and from this workplace is not travel in the performance of your duties. These expenses are a prerequisite to the earning of assessable income and are not incurred in producing that income. In addition, these expenses are incurred as a necessary consequence of living in one place and working in another. Therefore, they are not incurred in gaining or producing your assessable income and are not deductible under section 8-1 of the ITAA 1997. Accommodation, meals and incidentals Generally, accommodation expenses are private in nature and are not deductible. The issue of expenses incurred in relation to accommodation near the work place 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 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. The Federal court disallowed a 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 because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations and therefore were not deductible. In your case, you have incurred expenses for accommodation, meals and incidentals due to having your home in one city and your employment in another. Whilst the expenses would not be incurred but for the distance of your work place from your family home, 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. A deduction is therefore not allowable for your accommodation, meal expenses and incidentals under section 8-1 of the ITAA 1997.

Relevant facts: You are employed by a legal firm to work from home in City A. | Your employer requires you to travel to City B and work from the company's office for one week in every four. | This travel requires you to stay away overnight in City B for the week. | You incur expenses for travel, accommodation, meals and incidentals.