Private ruling: Travel expenses
Date of advice: 2 December 2015
Published: January 2016
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for the costs incurred for airfares, food, drinks and incidentals? | A1: Yes.

Relevant facts and circumstances: You are a company providing medical services. You currently have or have had contracts in various places around the country. All payments under these contracts are received through the company. Your practitioner lives in City A and to perform their duties they travels from City A to other cities and then connecting transport to the remote communities. Some of the travel costs are reimbursable from your clients however your practitioner on many occasions will organise their own travel arrangements. Transport on location is generally provided by the client through hire vehicles or the clients own fleet. The same arrangements also exist for accommodation. In some circumstances expenses are incurred for additional airfares and taxis if it falls outside of the clients funding guidelines. Additional expenses may also be incurred for travel costs such as airfare upgrades, change of flight time or for additional baggage. At all locations you incur expenses for food, laundry, cleaning and incidentals, plus costs to maintain accommodation and vehicles which are provided. You also incur expenses for phone, internet and other communications outside of the client's facilities. The company incurs all the expenses.

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 or they are necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. The phrase 'necessarily incurred' does not mean that the expense was unavoidable or logically necessary. The expense must be clearly and appropriately adapted for the ends of the business. In the case of a company, the relevant purpose is the corporate purpose. This requires an examination of the purpose, motive or intention of the company's directors, officers and employees. In your case, the provision of medical services to remote and rural areas is your main business activity and how you produce assessable income. It requires your practitioner to be away from home in remote locations. During those times, the expense that you incur to provide them with airfares, food, drinks and incidentals is connected to the work in which they are engaged. Therefore, the expenses are considered to be connected to the production of your business income and have the essential character of a business expense. The airfares, food, drinks and incidentals expenses that you incur for your employees whilst they are working away from home overnight will be deductible under section 8-1 of the ITAA 1997.