Private ruling: Travel and living expenses
Date of advice: 28 January 2016
Published: March 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim a deduction for the expenses that you incur to travel between your home and your temporary accommodation near your workplace? | A1: No. | Q2: Are you entitled to claim a deduction for all or part of your rent and living expenses while you are living in your temporary accommodation? | A2: No.

Relevant facts and circumstances: You are employed on a full-time basis. You have recently moved back to your residence which is a considerable distance from your workplace. You requested your employer change your work status enabling you to become a FIFO worker, which would allow you to live at the camp on-site while you are rostered on. Your employer told you this was not possible and provided you with other options which were not possible for you. You were able to change to a roster which means you have one week off work for every four weeks worked but would not give you the same benefits provided to your FIFO/DIDO co-workers. You rent a small unit to enable you to be near your place of employment and travel between your home and this unit.

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 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, or relate to the earning of exempt income. Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166). Generally accommodation and travel expenses incurred by a person, who lives away from home in order to carry out employment duties at the place of employment, will not be deductible. Expenses of this nature are private, or incurred before or after the activity of earning assessable income. The issue of expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location has been considered by the courts on a number of occasions. In the case Federal Commissioner of Taxation v. Charlton 84 ATC 4415; (1984) 15 ATR 711 ( Charlton's Case ), the taxpayer was a pathologist employed to carry out autopsies for the local coroner in Bendigo. He rented a flat in Bendigo while maintaining a permanent family home in Melbourne, located approximately 150kms away. There was evidence that there was difficulty in finding motel accommodation in Bendigo and the taxpayer was reluctant to make the round trip back to Melbourne without rest. The taxpayer claimed that the rental expenses were incurred in the production of assessable income. Justice Crockett of the Supreme Court of Victoria ruled: The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he, not only needs to incur expense in travelling to that place but, also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible. The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations. This is supported by the decision in Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms' Case ), where the Federal Court held that expenses incurred in relation to accommodation near the work place while maintaining a family residence in another location were not an allowable deduction as they were considered to be private expenses. Your circumstances are considered to be comparable to those in Charlton's Case and Toms' Case. Whilst we acknowledge your need to relocate back to your residence and your decision to maintain your employment, your travel, accommodation and living expenses are incurred to put yourself in a position to perform your duties and not in the actual performance of those duties. Consequently, your travel, accommodation and living expenses are considered to be of a private or domestic nature and are not deductible under section 8-1 of the ITAA 1997.