Private ruling: Work-related travel expenses
Date of advice: 5 October 2016
Published: November 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim deductions for accommodation, meals and home running costs whilst working at a location away from your normal residence and receiving a location allowance? | A1: No

Relevant facts and circumstances: You are employed in a remote location. Your employment requires you to be away from your home, within close proximity to your employment for the duration of your roster, as well as on-call outside of your normal hours. You maintain a residence in the remote location for this purpose. You are paid a location allowance. The location allowance you receive is rolled in with your normal gross payments and is not listed separately on your payment summary.

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

Reasons for decision: Summary: Section 8-1 of the 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. The cost of meals, accommodation and incidentals are allowable deductions where the taxpayer is travelling away from home in the course of performing their work duties. For example, an office worker attending an interstate conference or an 'on road' salesman could claim deductions for their expenses. However, no deduction is allowable for these expenses where a taxpayer works at a different location to where they normally live. The place where a taxpayer stays while away from home is considered to be their usual place of residence for that period. 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. Court decisions and decisions of the Administrative Appeals Tribunal (AAT)/Board of Review, which provide an independent view as to what effect taxation laws should have, confirm this. In Case X4 90 ATC 116; AAT Case X4 21 ATR 3120 a specialist radiologist with a practice in a small provincial town over 100 kilometres from a capital city was denied a deduction for the costs of maintaining a house which had been purchased in the city where the taxpayer also had professional obligations. The taxpayer travelled to the city every week. The house was not used for business purposes. The sole purpose of purchasing the house was to provide accommodation while the taxpayer was in the city. The AAT found that the overall picture was that the taxpayer had created a home away from home. Accordingly it held that the outings were incurred for the purposes of maintaining domestic premises and they did not have any relevant connection with income producing activities. It also held that even if it could be shown that the outgoings were incurred for the purpose of producing assessable income the deductions would be disallowed as outgoings of a private or domestic nature. This decision endorsed the principle established in Lunney v FC of T 100 CLR 478; 11 ATD 404; ALR 225 ( Lunney's case ), that is, prima facie a taxpayer cannot deduct living expenses as they are considered to be private and domestic in nature. To paraphrase what was said in Lunney's case : while a particular expenditure, for example rent, may be a prerequisite to the earning of income that is not to say that the expenditure is incurred in the gaining or producing of that income. In your case, you have accepted employment which requires you to perform your work duties in a remote area. Your home is located some distance away from this remote location. Given the nature of the services to be performed, its length and the fact that the services will be performed, your place of employment is considered to the remote location. During your period of work, you are not considered to be travelling in the course of performing your work duties. Instead, it is considered your travel is undertaken in order to enable you to commence your employment duties. The accommodation, meal and home running cost expenses are incurred by you to enable you to stay in proximity to your place of work. These expenses are a prerequisite to the earning of your assessable income and are not expenses incurred in the course of gaining or producing that income. They are living expenses and have been incurred for private and domestic purposes. Therefore, no deduction is allowable under section 8-1 of the ITAA 1997 for the accommodation, meal and home running expenses you incurred while working in a remote location.