Private ruling: Travel Expenses
Published: January 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for accommodation and travel expenses? | A1: No.

Relevant facts and circumstances: You reside in a city in your family home and in relevant year you commenced employment in another city in another state. You incurred the cost of travelling to your new work location and short-term accommodation in a hotel. You also entered into a rental lease agreement for accommodation. A short time later you relocated with your work to a nearby city. You found new rental accommodation and entered into a rental lease agreement. You continued to lease your first accommodation place. Your work contract was terminated and you returned to your home town. You cancelled the lease agreements you had for the rental properties, and this resulted in you incurring break of lease expenses and additional rental expenses. Your costs included your airfares, taxi fares, meals and incidental expenses. Your employer did not pay for your relocation and rental accommodation expenses and did not pay you an allowance.

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, 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. Generally, accommodation expenses are private in nature and are not deductible. 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. 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 considered that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the forest, and its purpose was to enable him to retain his residence at Grafton although employed in the forest. It was 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 incurred additional travel and accommodation expenses while you maintained your family home in one state and had employment in another state. These 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 and travel expenses under section 8-1 of the ITAA 1997.

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