Private ruling: Rental deduction
Date of advice: 28 September 2016
Published: November 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you eligible for a deduction for the difference between the rent contribution you pay and the average market rent for the area? | A1: No.

Relevant facts and circumstances: You are an employee. As a condition of your employment you are required to reside in a specific residence. You are required to pay a contribution toward your accommodation, and in the area you reside the contribution is higher than the market rent.

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 except where the outgoings are of a capital, private or domestic nature. Although you are required to live in the specified residence, this does not automatically mean you are entitled to a deduction for the associated expenses. The expenses must meet the criteria for deductibility under section 8-1 of the ITAA 1997. Expenditure on the daily necessities of life for example, accommodation, is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature. Exceptions to this are where you are undertaking work related travel and are required to stay away overnight. In your case your accommodation expenses do not relate to work related travel. The fact that your contribution is more than the average market rental rate in the area does not change the nature of your expense. Your accommodation expenses are private in nature and not an allowable deduction. Even though the expenditure may have a causal connection with the earning of your income, the expenditure is inherently of a private or domestic nature. Accordingly, you are not entitled to a deduction for any portion of your contribution expenses under section 8-1 of the ITAA 1997. The legislation does not provide for any other tax concession or tax offset in your circumstances.