Private ruling: Caravan expenses
Date of advice: 22 April 2020
Published: June 2020
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Are you entitled to a deduction for the purchase price of the caravan? | A1: No | Q2: Are you entitled to a deduction for the running costs of the caravan, such as repairs and insurance or for depreciation of the caravan? | A2: No | Q3: Are you entitled to a deduction for accommodation expenses while living in your caravan near either of the project locations in State B? | A3: No | Q4: Are you entitled to a deduction for the interest on the loan for the purchase of the caravan? | A4: No

Relevant facts and circumstances: You are a project manager. Your permanent residence is in State A. You were offered a position by Employer X. Employer X is involved in a large project in State B. The terms and condition of the employment position you were offered stated that the 'Location of Work' was the project office in State B. You purchased a caravan and booked a site in a caravan park near the project office in State B for the duration of the project. Whilst in transit you received a message to report to a different project in State B. You were there for a few months before reporting to work at the original project you were assigned to. The terms and condition of the employment position state that your base salary is inclusive of a car allowance. Your contract of employment states that your employer will reimburse you for any work related expenses, including reasonable travel, accommodation and entertainment expenses. You have not been reimbursed any expenses in relation to your caravan.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 40-25

Reasons for decision: Summary: The accommodation expenses are considered to be incurred in order to put you in a position to earn assessable income rather than in the course of earning assessable income. The accommodation expenses are also considered to be private in nature. Therefore the expenses are not deductible. | Detailed Reasoning - Detailed reasoning: Expenses incurred in travelling are deductible expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) where 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 or a provision of the taxation legislation excludes it. The purchasing of plant and equipment are of a capital nature and may be deductible under Division 40 of the ITAA 1997. Section 40-25 of the ITAA 1997 allows a deduction for the decline in value of a depreciating asset to the extent that it is used for the purpose of producing assessable income. Accommodation Expenses 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 expenses incurred by a person who lives away from home in order to carry out his or her work duties, at the place of work, 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. In Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466 ( Toms Case ) the Federal Court disallowed a forest worker's deduction for the cost of maintaining a caravan and other living expenses. The taxpayer incurred the expenses in providing temporary accommodation at the base camp because the taxpayer had chosen to reside at a place far from the worksite. These expenses were dictated not by work but by private considerations. However, accommodation expenses will be allowable where they are incurred by a taxpayer while they are travelling in the course of undertaking their work duties, for example, where the taxpayer's work is itinerant such as in the case of a travelling salesperson or an interstate truck driver. For a taxpayer's work to be considered itinerant, they must be required to travel between multiple work sites before returning home. It is not sufficient that the taxpayer has different work sites if they are not normally required to travel between the work sites before returning home. Case U97 87 ATC 584; AAT Case 68 (1987) 18 ATR 3491 ( Case U97 ) involved a relief fireman who worked at a number of different fire stations. He would work at a fire station for a number of days before being allocated to another fire station for another period. The Tribunal stated that although the taxpayer had more than one work place, he was not required to travel between work places before returning home and therefore his work was not itinerant. We consider that your circumstances are similar to that in Case U97 in that although you had more than one work place during the year, your work is not itinerant as you are not regularly required to travel between multiple work places before returning home. Your circumstances are also comparable to that in Toms Case in that accommodation expenses are being incurred because your normal residence is located a substantial distance from where you work. The accommodation expenses are not incurred in the course of earning assessable income, rather they incurred in order to put you in a position to earn assessable income. The accommodation expenses are considered to retain their inherently private nature. Therefore, your accommodation expenses, being the expenses in relation to your caravan, are not deductible. It is noted that your employment contract states that your employer will reimburse you for any work related expenses, including reasonable travel and accommodation expenses. We asked you why you were not reimbursed by your employer for any of your caravan expenses given that you claim they are work related but we did not receive an explanation. The fact that your employer has not reimbursed you for any of these expenses despite your contract providing for the reimbursement of work related expenses is consistent with our view that these expenses are private rather than work related in nature.