Private ruling: Work Related expenses - travel and accommodation
Date of advice: 17 August 2017
Published: January 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are the rental accommodation costs you incurred while working in a town away from your usual place of residence deductible under section 8-1 of the Income Tax Assessment Act 1997? | A1: No. | Q2: Are the airfare cost you incurred to travel to and from a town away from your usual place of residence, but in which you were working temporarily, deductible under section 8-1 of the Income Tax Assessment Act 1997? | A2: No.

Relevant facts and circumstances: You are employed by an organisation. Your substantive position and principle place of residence are based in city A. You applied for and accepted a temporary higher duties position within the organisation which was based in city B. The contract for the temporary higher duties position was for 3 months. The contract was extended by 6 more months however you have been working out of the city A office since the end of the initial 3 month contract and may or may not return to city B half way through the additional 6 month contract. You have incurred expenses for rental accommodation in city B and airfare costs to travel between city A and city B. You were not paid an allowance by your employer for your travel to and from city B or your accommodation in city B.

Relevant legislative provisions: Section 8-1 of the Income Tax Assessment Act 1997

Reasons for decision: Detailed Reasoning - Issue 1: Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature. An employee's ordinary costs of travelling between home and work, and maintaining a home and consuming food and drink to go about their daily activities, are of a private or domestic nature and are not deductible. Such costs are 'preliminary to the work' and are not incurred in performing the work activities | Detailed Reasoning - Question 1: 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. He claimed the costs of maintaining his caravan and other living expenses such as the cost of heating and lighting. The Federal Court held that the expenses incurred in relation to the temporary accommodation near the workplace while maintaining a family residence in another location were dictated not by his work but by private considerations, and therefore were not deductible. In your case, you incur expenses for renting accommodation to enable you to work in a different town to where your principal residence is. However, as in Toms’ Case , 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 rental accommodation expenses. | Detailed Reasoning - Question 2: A transport expense is not deductible where the travel is to start work or depart after work is completed. The cost of such travel is not incurred in gaining or producing the employee's assessable income. In contrast, a transport expense is deductible where the travel is undertaken in performing the employee's work activities. To determine whether travel is undertaken in performing an employee's work activities, consider the following factors: (a) whether the work activities require the employee to undertake the travel (b) whether the employee is paid, directly or indirectly, to undertake the travel (c) whether the employee is subject to the direction and control of their employer for the period of the travel, and (d) whether the above factors have been contrived to give a private journey the appearance of work travel. In your case you were not required to travel by your employer as you applied for this temporary position located in another town and were not directed to undertake the work as part of your usual position. You were not paid for or under your employer’s direction during the period of travel which was on the weekends outside your normal work hours. You were travelling from your home in city A to your alternate but regular place of work in city B and as such it is considered that this travel is home to work travel and undertaken prior to your income producing activity beginning. As such no deduction is allowable for your travel costs between city A and city B.