Private ruling: Travel related expenses
Date of advice: 9 November 2015
Published: November 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled a deduction for travel to and from Australia and your country of residence for work related purposes? | A1: No

Relevant facts and circumstances: You are not a resident of Australia for tax purposes. You travel from your country of residence to Australia a number of times a year to work, for which you are paid. You travel to Australia solely for work purposes.

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

Reasons for decision: Summary: Generally the expenses of travel to and from work are not deductible. This is either because such expenditure is private in nature, or because it is not an expense incurred in gaining or producing assessable income. Lunney v. Commissioner of Taxation [1958] ALR 225; 1958 0311H HCA; 100 CLR 478; (1958) 11 ATD 404; (1958) 32 ALJR 139 ( Lunneys case) introduced what is now regarded as the essential character test. This test requires that for an expense to be deductible, it must have the essential character of a business or income producing expense. The taxpayer in this case sought to deduct the cost of travelling from his home to his work. The expenses were disallowed as being private and domestic, establishing the broad principle that costs incurred because of living in one place while working in another cannot be regarded as deductible. The fact that certain expenditure, such as travelling to work, must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to the derivation of assessable income or that it is incurred in the course of gaining or producing assessable income. It is a prerequisite to the earning of assessable income rather than being incurred in the course of gaining that income. In your case you are not entitled to a deduction for the expenses incurred to travel in either direction between your home in another country and your place of work in Australia. These expenses are not incurred to gain or produce your assessable income; rather, they are incurred to enable you to commence, or return home after completing your income earning activities. These expenses are considered to be private or domestic in nature.