Private ruling: accommodation expenses
Published: January 2014

Ruling: A1: No. Year ended 30 June 2013 Year ended 30 June 2014 1July 2012 You were working in city A. You then moved with the same company to city B. You rented a place to live in city B. Your employer requires you to also work in city A. You go to city A approximately once a month and stay for at least one week. You rented accommodation in city A as it was cheaper than getting a hotel and you could also work from the house. The accommodation you rent is not used by anyone else when you are not there. You pay rent in city A for the time you are there as well as for the time you are not. Income Tax Assessment Act 1997 Section 8-1. 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, or a provision of the ITAA 1997 prevents it. A number of significant court decisions have determined that for an expense to be an allowable deduction: · it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; (1958) 100 CLR 478 ( Lunney's case )), · there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T , (1949) 78 CLR 47), and · it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). Expenditure on the daily necessities of life (for example, accommodation, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature. Exceptions to this are where you are undertaking work related travel and are required to stay away overnight. However, no deduction is allowable if a taxpayer is merely maintaining accommodation close to their usual work location for convenience. In your case, you regularly work at city A and B. Each place is regarded as a normal place of work for you. While it is acknowledged that your usual home is in city B, it is not considered that your travel to and from city A is work related travel. Rather it is private travel carried out to enable you to be closer to the work site and commence your duties. The distance of the travel does not alter the private nature of the travel. In Federal Commissioner of Taxation v. Toms 20 ATR 466; 89 ATC 4373 ( Toms case ), 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. The Federal Court disallowed the forest workers deduction for the cost of maintaining a caravan and other living expenses. The taxpayer's family home in Grafton was some 108 kilometres from the base camp so he lived in the caravan during the week and returned to the family home on weekends. The caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his employment in the State forest, and its purpose was to enable him to retain his residence in Grafton although he was employed in the State forest. Had he lived at a town closer to the forest, there is no question the caravan would have been unnecessary. While your situation differs to Toms case, the principles are relevant. In your case you incur accommodation expenses in city A. We acknowledge your specific circumstances, however, your accommodation expenses are incurred to put you in a place where you are closer to your place of employment. City A and city B are regarded as your normal places of work. The accommodation expenses incurred are not related to the actual performance of your duties. They are more a convenience and a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income. Your accommodation expenses are not deductible, even though the expenditure has a causal connection with the earning of your income. Furthermore, the essential character of the expense is of a private or domestic nature. Accordingly, you are not entitled to a deduction for the accommodation expenses under section 8-1 of the ITAA 1997.




Are you entitled to a deduction for your rent expenses?