Private ruling: Deductions
Date of advice: 6 March 2017
Published: March 2018
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Can you claim the cost of flights between City A and City B? | A1: No.

Relevant facts and circumstances: You paid for flights between City A and City B in order to fulfil the duties in your role. You were employed on a salary and were covered by WorkCover from the time you left your home in City A. Your approval to have the flights salary sacrificed was withdrawn when you did not want to fly to City A for all rostered days off. Your contract does not state that you are travelling on company time or considered to be rostered on when you travelled from City A to City B.

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

Reasons for decision: Summary: You are not entitled to claim deductions for the cost of flights for travel between City A and City B. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 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. You have requested that your flight travel expenses be deductible in light of the case: John Holland Group Pty Ltd & Anor v. Commissioner of Taxation (2015) ATC 20-510 ( Holland ). In this case, the employees commenced their 'rostered-on' employment duties from the time of their arrival at Perth Airport (the point of hire). Their travel on the flight from Perth Airport to Geraldton, and the return flight, occurred during rostered-on work time during which the employees were remunerated at the applicable hourly rate. All travel between Perth Airport and Geraldton was controlled, arranged and paid for by the employer; the employees had no control over their travel arrangements. The employer specifically directed that the employees undertake travel by requiring them to present themselves at the point of hire, Perth Airport at a specified time to embark on a specified flight. The same procedure applied on returning from Geraldton. The terms of employment required employees to act in accordance with directions from their employer and to observe certain codes of conduct. During travel on the employer's time, the employees were bound to comply with all the employer's directives and policies and disciplinary action (including dismissal) could result if an employee breached any of the requirements. The Full Court found that from the time the employees checked in at Perth airport as directed by their employer they were travelling in the course of their employment, subject to the directions of the employer and being paid for it. The Full Court also found that there is no reason why Perth airport should not be a point at which the employees’ duties and remuneration for performance of those duties commenced and ceased. The contract of employment so provided. An ATO Decision Impact Statement published by the Commissioner on Holland stated that “such matters can involve questions of fact and degree and different facts may result in different conclusions as to deductibility. The ATO will continue to approach travel deduction cases by weighing all the relevant facts and circumstances and applying the relevant tax law and authorities to those facts”. The case of Lunney & Hayley v Federal Commissioner of Taxation (1958) 100 CLR 478 ( Lunney ) involved a ship’s joiner who reported at the commencement and completion of each day’s work to his employer’s office at the waterfront from which he travelled (at his employer’s expense) to various parts of the port of Sydney to carry out his work. He travelled daily by bus from his residence to the city to report for work and to return home after work. The High Court held that even though expenditure on transport is a prerequisite to the earning of income, it is still different from incurring the expenditure in or in the course of gaining income. Paragraph 21 of Taxation Ruling IT 112 Deductibility of travelling expenses between residence and place of employment or business states in the case of the great majority of employees and of people pursuing a profession or other ordinary vocation, expenses of travelling - whether by public transport or by use of their own motor vehicles - in habitually going from home to a regular place of employment or business are not deductible. The essential character of the expenditure in such cases is a personal or living expense rather than an expense incurred in, or in the course of, gaining assessable income. These journeys are made by such a taxpayer on the way to his or her employment and in returning from it. They are not made in the course of his employment or in the performance of his or her duties. In Case U156 87 ATC 908 it was considered that generally, the duties of a salary and wage earner will not commence until the arrival at a place of work and will cease upon departure from work. Further, as considered in Case U156 87 ATC 908, Case V103 88 ATC 664, Case V111 88 ATC 712 and Case V131 88 ATC 838, 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. Even though you are paid a salary and can be directed to travel to City B outside your normal days of duties, the above-mentioned cases establish that erratic hours and on-call nature of employment do not alter the personal and private nature of your travel. The facts in your situation are materially different to that of the employees in Holland. Even though your contract broadly states that you may be required to travel as part of your duties and work at places other than your normal location, your contract does not state that your duties commenced when you checked in to City A’s airport. This is unlike the employees in Holland where their contracts provided that they were paid and their duties commenced when they checked in to the Perth airport. Additionally, just like in Lunney where the travel from the taxpayer’s home to the city was deemed to be private or personal in nature, your travel from City A to City B is also deemed to be private or personal in nature. This is further supported by the fact that the employer in Holland paid for the employees’ flights while your employer did not pay for your flights. The employees in Holland were travelling on work time contrasted to your situation where you were travelling to work. The fact you are required to travel to City B from City A for work does not change the essential character of the expenditure incurred in travelling between home and work being of a private or personal nature. The facts in your case are different from the facts in Holland and more closely resemble the facts in Lunney. Therefore, you are not entitled to claim a deduction for the costs of flights for travel between City A and City B as travel from home to your place of employment is personal in nature.