Private ruling: Travel, accommodation and living expenses
Published: June 2014
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2010

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


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. Allowances received by an employee from an employer are generally assessable income to the employee. However, an employee is not automatically entitled to a deduction for expenses incurred in relation to an allowance. The expenses must meet the criteria for deductibility and the substantiation requirements. As a general rule, expenditure on accommodation and meals while working away from home is not allowed as a deduction. These costs are essentially 'living expenses' of a private or domestic nature. The fact that income cannot be earned unless certain expenses are necessarily incurred is not determinative of deductibility. Where it has been established that a property used to accommodate a taxpayer amounts to a second residence, the Courts and the Administrative Appeals Tribunal have consistently held that the essential character of the expenses incurred is of a private or domestic nature unconnected with income-producing activities and, therefore, the expenses are not deductible. The required connection between second residence expenses and a taxpayer's income-producing activities is absent. Even though you are an Australian resident, it is considered that the place where you live overseas is a second residence. As such, no deduction is allowed for any accommodation or living expenses. | Detailed Reasoning - Travel: A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense. The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties (see paragraph 77 of Taxation Ruling TR 95/34). Your travel between Australia and your overseas location and your travel from your overseas residence to your work location is considered to be a private expense as the travel is merely putting you in a position to carry out your employment duties, and not in performing those duties.

Relevant facts: You are an Australian resident for tax purposes. | You have a two year contract working overseas. | You are paid a daily rate as salary and wages plus a monthly living allowance and mobilisation and demobilisation payments. | The monthly living allowance is paid to cover accommodation, transportation, medical insurance and other subsistence expenses. | The mobilisation and demobilisation allowance is paid to cover air tickets, luggage, taxi fares, visa fee and all travel expenses incurred during travel between Australia and your work location.