Private ruling: Deduction-travel expenses
Published: January 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to claim a deduction for meal and incidental expenses using the reasonable allowance amounts? | A1:  | Q2: Are you entitled to a deduction for the cost of travelling to and from work? | A2: 


Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1. | Fringe Benefits Tax Assessment Act 1986 Subsection 30(1). Fringe Benefits Tax Assessment Act 1986 Subsection 136(1) Income Tax Assessment Act 1936 subsection 23L(1)

Reasons for decision: Detailed Reasoning - Meals and incidentals expenses: 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. The mere receipt of an allowance does not entitle an employee to a deduction. As explained in Taxation Ruling IT 2543 at paragraph 7 the receipt of an allowance imparts no greater degree of deductibility to an expense which is incurred in relation to that allowance. The Taxation Board of Review stated in 84 ATC 212 ( Case R22 ) at page 214: The fact that an allowance of a particular kind is paid to a taxpayer does not of itself impress an outgoing, ostensibly related to that allowance, with any greater degree of deductibility than that which it would have in the event that no such allowance was paid. In fact it is the character or nature of the allowance which determines whether it is properly to be included as assessable income; likewise, it is the nature of the outgoing itself, without regard to the nature of any allowance that might be received, that determines whether it is an outgoing or expenditure that properly falls for deduction Expenditure on food, drink and incidentals is inherently private in nature and therefore generally not deductible ( Federal Commissioner of Taxation v. Cooper 91 ATC 4396; (1991) 21 ATR 1616; Federal Commissioner of Taxation v. Toms 89 ATC 4373; (1989) 20 ATR 466) unless the occasion of the outgoing gives the expenditure the essential character of a working expense, as in expenditure incurred while travelling away from home on work. To determine what is a bona fide amount to cover meals or expenses incidental to the travel depends on the facts of each case, including the arrangements for payment of the allowance. Taxation Ruling TR 2004/6 discusses the conditions when the above substantiation exception applies. For travel allowance expenses to be considered for exception from substantiation the employee must be paid a bona fide travel allowance and the amount must be included in assessable income. A travel allowance that is not paid or payable to cover specific work related travel is not considered a travel allowance for the purposes of the exception from substantiation. The Commissioner publishes reasonable amounts for accommodation, meals and deductible expenses incidental to travel. Taxation Determination TD 2010/19 sets out the relevant amounts that the Commissioner considers reasonable for the 2011 financial year. In your case, you received a LAFHA allowance to compensate you while working in different areas on time consuming projects while living away from your normal place of residence. You lived in accommodation provided by your employer. You are not considered to be travelling in the course of undertaking employment duties. Rather the different locations you attended are considered your regular place of work for that period and a deduction for meals and incidental expenses is not allowable as the expenses are private in nature. Therefore, the exception from substantiation will not apply and you cannot use the reasonable travel expenses amounts for daily travel as outlined by the Commissioner in TD 2010/19. In addition, your employer has advised that the allowance paid is a LAFHA. A LAFHA is defined in section 136 of the FBTAA. If the LAFHA benefit paid is a fringe benefit within the meaning of subsection 30(1) of the FBTAA, the income will be non-assessable and non-exempt income in the hands of the taxpayer (employee) under subsection 23L(1) of the Income Tax Assessment Act 1936 . Therefore where a LAFHA is paid, a deduction for meals and incidental expenses are not deductible as the associated allowance does not form part of your assessable income. Travel A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense ( Lunney v. Federal Commissioner of Taxation (1957-1958) 81 ATC 186 ALR 225; 1958). The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties. However there are situations where it has been accepted that travel by employees from home to work is deductible. These are if: · the employee's home constitutes a place of employment and travel to a work place to continue work · the employee's employment is inherently of an itinerant nature, · travel is between two places of employment, and · the employee has to transport by vehicle bulky equipment necessary for employment. In your case, you were required to travel from your place of residence to your accommodation in town A and from town A to your place of employment. From the information you have provided none of the exceptions would apply as your work is not of an itinerant nature, your home or accommodation at town A is not considered your place of employment, you are not travelling between two places of employment and there is no information to indicate you are required to transport bulky equipment necessary for employment. Therefore, the expenses incurred for your home to work travel are private and are not deductible under section 8-1 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You reside in a property leased in your name. | You are employed by a business (the employer). | You receive an allowance from your employer which is called a living away from home allowance (LAFHA). | The LAFHA is paid to distant workers who are required to work on time consuming projects and who are required to live away from their home for a period of time. | You worked a number of locations for your employer for extended periods of time. | The LAFHA is paid on a daily basis and is not included in your gross salary and has not been subject to withholding tax. | Your employer paid for your accommodation while you worked and stayed at the different work locations. | Your employer also paid you a travel allowance to commute travel between the following locations: | · from town A to your place of employer.