Private ruling: Travel deductions
Date of advice: 18 May 2023
Published: 3 July 2023
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: As a medical practitioner, is travel and accommodation for regular monthly work as a sole trader a deductible expense? | A1: No

Relevant facts and circumstances: You are a medical practitioner. You have an employee role (PAYG). Additionally, you operate as a sole trader (through an ABN and are GST registered) at various other locations in both the public and private sector. Some financial and administrative work occurs at home in relation to your sole trader activity. You travel interstate monthly to work at a large facility. You incur regular accommodation and travel expenses each month when travelling to undertake this work including flights, accommodation and meals. This arrangement has been in place for a long time with accommodation being in a varying location each time you travel. You provided a: • contract covering the interstate arrangement • typical schedule of your work as an employee and for your sole trader work activities • a travel diary.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 25-100

Reasons for decision: Summary: In considering the deductibility of travel expenses a distinction is made between travel to work and travel on work. A deduction is generally not allowable for the cost of travel between home and work because the expenses are private in nature and are not considered to be incurred in producing assessable income. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA) 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. Section 25-100 of the ITAA 1997 specifically states that travel between two places is not travel between workplaces if one of the places you are travelling between is a place at which you reside. This provision denies a deduction for your travel expenses between home and your workplace, even if you carry out activities at home related to your work. The conduct of some work activities while travelling (for example, answering emails on the plane) does not convert the travel to being part of the employment if it otherwise private. The travel itself is a prerequisite to commencing work duties at the second location. A deduction is generally not allowable for the cost of travel between home and the normal workplace as it is considered to be a private expense and not incurred in producing assessable income. A loss or outgoing is not incurred in gaining or producing assessable income merely because it is necessary. This is particularly relevant to living expenses. 'Expenditure on accommodation and meals ordinarily has the character of a private or domestic expense' (paragraph 88 of Taxation Ruling TR 98/9). These costs are preliminary to the work and are not incurred in the course of performing those activities. Expenses that are incurred as a consequence of living in one place and working in another and any expenses incurred to enable a taxpayer to commence their income earning activities are considered private in nature. Paragraph 6 of Taxation Ruling IT 2543 states: The mode of transport, the availability of transport, the lack of suitable public transport, the erratic hours and times of employment, the on-call nature of the employment, the time of travel, the distance of travel, the unavailability of residential accommodation near the place of work, the frequency of travel and the necessity of travel are not factors which will alter the essential character of travel between home and work. The cost of travel between home and work is generally incurred to put a person in a position to perform duties, rather than in the performance of those duties. You have a main residence and have taken contract work in another location. This travel is not considered to be work-related travel. The costs are not incurred in the course of gaining or producing assessable income. The accommodation expenses incurred are private or domestic in nature as you have made a choice to work away from your normal place of residence to take up the position in another location for a long period. The fact that there may be some professional development opportunities in undertaking the position does not change the nature of the travel for this long-term undertaking. Consequently, the expenses you incur in travelling between home and your workplace and back home are inherently of a private or domestic in nature and no deduction is allowable under section 8-1 of the ITAA 1997.